Financial technology and ESG market: A wavelet-DCC GARCH approach

Naysary, Babak and Shrestha, Keshab (2024) Financial technology and ESG market: A wavelet-DCC GARCH approach. Research in International Business and Finance, 71. p. 102466. ISSN 0275-5319

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Abstract

This paper examines the co-movement between FinTech and ESG markets from a time-frequency domain perspective. We use an approach suggested by Vacha and Barunik (2012) and include wavelet coherence analysis and dynamic conditional correlation from a multivariate GARCH model (DCC GARCH). We find a significant bi-directional positive relationship between the FinTech and ESG indices. We also find the DCC GARCH process to be mean reverting. The correlations between FinTech and ESG indices, based on both the wavelet coherence and DCC GARCH models, are found to fluctuate over time with the one based on DCC GARCH being higher on the average compared to the one based on wavelet coherence. Finally, we find that the correlations are significant for almost all frequencies except for the 256-day frequency. For the lower frequencies, such as 512-day (approximately 2-year frequency), the correlation increases.

Item Type:	Article
Identification Number:	https://doi.org/10.1016/j.ribaf.2024.102466
Dates:	Date Event 22 June 2024 Accepted 24 June 2024 Published Online
Uncontrolled Keywords:	ESG market, FinTech, Wavelet coherence, DCC GARCH
Subjects:	CAH17 - business and management > CAH17-01 - business and management > CAH17-01-02 - business studies
Divisions:	Faculty of Business, Law and Social Sciences > College of Business, Digital Transformation & Entrepreneurship
Depositing User:	Gemma Tonks
Date Deposited:	18 Sep 2024 12:12
Last Modified:	18 Sep 2024 12:12
URI:	https://www.open-access.bcu.ac.uk/id/eprint/15857

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