Time-varying price dynamics of clean and dirty energy portfolios

Ah Mand, Abdollah and Ghafoor, Abdul and Sifat, Imtiaz (2023) Time-varying price dynamics of clean and dirty energy portfolios. Journal of Environmental Management, 337. p. 117687. ISSN 0301-4797

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This paper investigates the dynamic relationships between four key instruments related to clean and dirty energy assets: WTI futures, United States Oil Fund (USO), EnergySelect Sector SPDR Fund (XLE), and iShares Global Clean Energy ETF (ICLN). Econometric tests confirm a long-term relationship between all variables, with causality tests showing that clean energy ETF has a causal influence on most instruments. However, the causal patterns are not definitively interpretable in an economic framework. Moreover, using wavelet-based tests on a 1-min interval transaction dataset, we further find convergence delay between WTI and XLE, and to a lesser extent, USO, but not ICLN. This suggests that clean energy has the potential to be a distinct asset class. We also identify the time scales at which arbitrage opportunities and liquidity movements occur: 32–256 and 4–8 min, respectively. These are new stylized facts about clean and dirty energy market assets and contribute to the limited literature available on high-frequency dynamics in the said markets.

Item Type: Article
Identification Number: https://doi.org/10.1016/j.jenvman.2023.117687
5 March 2023Accepted
28 March 2023Published Online
Uncontrolled Keywords: Energy economics, Environmental economics, Clean energy, Dirty energy, Comovement, Sustainable investment
Subjects: CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions: Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics
Faculty of Business, Law and Social Sciences > College of Business, Digital Transformation & Entrepreneurship
Depositing User: Abdul Ghafoor
Date Deposited: 11 Apr 2023 15:01
Last Modified: 20 Jun 2024 12:05
URI: https://www.open-access.bcu.ac.uk/id/eprint/14313

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