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Multivariate dependence and spillover effects across energy commodities and diversification potentials of carbon assets
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
Rennes Sch Business, France.
Montpellier Business Sch, France.
Linköping University, Department of Management and Engineering. Linköping University, Faculty of Arts and Sciences.
2018 (English)In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 71, p. 35-46Article in journal (Refereed) Published
Abstract [en]

In a first step, we model the multivariate tail dependence structure and spillover effects across energy commodities such as crude oil, natural gas, ethanol, heating oil, coal and gasoline using canonical vine (C-vine) copula and c-vine conditional Value-at-Risk (CoVaR). In the second step, we formulate portfolio strategies based on different performance measures to analyze the risk reduction and diversification potential of carbon assets for energy commodities. We identify greater exposure to losses arising from investments in heating oil and ethanol markets. We also find evidence of carbon asset providing diversification benefits to energy commodity investments. These findings motivate for regulatory adjustments in the trading and emission permits for the energy markets most strongly diversified by carbon assets. (C) 2018 Published by Elsevier B.V.

Place, publisher, year, edition, pages
ELSEVIER SCIENCE BV , 2018. Vol. 71, p. 35-46
Keywords [en]
Carbon assets; Energy commodities; Tail dependence; Risk spillover
National Category
Energy Engineering
Identifiers
URN: urn:nbn:se:liu:diva-147950DOI: 10.1016/j.eneco.2018.01.035ISI: 000431159100003OAI: oai:DiVA.org:liu-147950DiVA, id: diva2:1209479
Note

Funding Agencies|Jan Wallander and Tom Hedelius Foundation

Available from: 2018-05-23 Created: 2018-05-23 Last updated: 2018-05-23

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CiteExportLink to record
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  • nn-NB
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