Do rare earths and energy commodities drive volatility transmission in sustainable financial markets? Evidence from China, Australia, and the US

Inzamam UI Haq, Hira Nadeem, Apichit Maneengam, Saowanee Samantreeporn, Nhan Huynh, Thasporn Kettanom, Worakamol Wisetsri*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)
97 Downloads (Pure)

Abstract

The high volatility and energy usage of rare earths have raised sustainable and financial concerns for environmentalists and sustainable investors. Therefore, this paper aims to investigate time-varying volatility transmission among rare earths elements, energy commodities, and sustainable financial markets. The sample covers global and major financial markets, i.e., US, China, and Australia. Using daily log returns from 2018 to 2022, the paper considers the dynamic Time Varying Parameter-Vector Autoregression (TVP-VAR) connectedness approach to gauge the time-varying features of volatility spillovers. The findings of total spillovers index reveal weak connectedness among markets during the sampled period. US and China rare earth markets were net volatility transmitters, whereas the Dow Jones Australia Sustainability Index (ASI), China Sustainability Index (CSI), Dow Jones Sustainability World Index (SWI), and MVIS Global Rare Earth Index (MVISGREI) were net recipients. Moreover, energy commodities i.e., WTI Crude Oil, Gasoline, and Natural Gas were net volatility transmitters, while ASI, CSI, and SWI were major volatility recipients. The weak financial contagion effect and connectedness across financial markets uncovers possible diversification opportunities. However, the US sustainable financial market is persistently not affected by these volatility spillovers. Policymakers need to establish strict regulations to protect sustainable financial markets in China and Australia.
Original languageEnglish
Article number76
Pages (from-to)1-22
Number of pages22
JournalInternational Journal of Financial Studies
Volume10
Issue number3
DOIs
Publication statusPublished - 6 Sept 2022

Bibliographical note

Copyright © 2022 by the authors. Licensee MDPI, Basel, Switzerland. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

  • rare earths
  • energy commodities
  • crude oil
  • sustainable financial markets
  • TVP-VAR model

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