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.

We study the cross-quantile dependence of renewable energy (RE) stock returns on aggregate stock returns, changes in oil and gold prices, and exchange rates. Applying a recently developed cross-quantilogram approach, we provide two novel findings. First, although prior studies show that RE stock returns have a positive dependence on changes in oil prices and in the aggregate stock index, we find that the relationship is not symmetric across quantiles and that this asymmetry is higher in longer lags. Second, while the extant literature provides evidence that exchange rates and gold returns exert a positive influence on aggregate stock returns, we report that this positive influence on RE stock returns is observed only during extreme market conditions. These results are robust, (i) even after controlling for economic policy and equity market uncertainties, as well as (ii) in both a time-static full sample and recursive subsamples. (C) 2019 Elsevier B.V. All rights reserved.

This paper examines the cross-quantile dependence between developed and emerging market stock returns and investigates its time-varying characteristics, using recursive sample estimations. The results based on cross-quantilogram approach reveal a heterogeneous quantile relation for the USA, UK, German, and Japanese stock returns to those of the emerging markets. Systematic risk generally does not explain the cross-country dependence structure, since it remains essentially unchanged when controlling for financial, geopolitical, and economic uncertainties. Moreover, the cross-quantile correlation changes over time, especially in the low and high quantiles, indicating that it is prone to jumps and discontinuities, even in a seemingly stable dependence structure. These results are important for institutional investors and market observers.

The banking sectors in the Scandinavian countries are highly concentrated, typically undercapitalised and they have suffered through several crises since the 1990s. This article analyses the systemic risk in Denmark, Norway and Sweden focusing on the co-dependence in the tails of equity returns of an individual bank and the overall banking system. We use, partly in a new way, conditional cross-quantilograms (CQs) for this purpose. We find that the CQs are positive and statistically significant in the low and high quantiles indicating that the Scandinavian banks are systemically linked. The low-quantile dependence is relatively stronger compared with the magnitude of dependence in the other quantiles. These results hold even after controlling for equity market volatility and economic policy uncertainty. We further observe that the systemic risk was insignificant from the early-2000 to the outbreak of the global financial crisis (GFC). However, after the GFC and the euro zone crisis, the systemic risk has increased substantially. Finally, we find that bank size has a positive relationship with systemic risk (low-quantile dependence) while return on asset and loan to deposit ratio exhibit a negative influence. Furthermore, these relationships are asymmetric across quantiles.