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The dynamics of carbon on green energy equity investment: quantile-on-quantile and quantile coherency approaches
Bin Mo1, Zhenghui Li1, Juan Meng2
1Guangzhou Institute of International Finance, Guangzhou University, Guangzhou, 510006, China.
Abstract:
We analyze the dynamic correlation between the carbon price and the stock returns of green energy companies and calculate the hedging effect of the carbon price on stock returns in green energy sectors. The results show that the coefficients of the carbon price change with time and are vulnerable to extreme events like the COVID-19. The quantile-on-quantile (QQ) model results reveal a dynamic effect from the carbon price to the stock returns of green energy sectors. The quantile coherency (QC) approach results show that investors can benefit more in the short term with high-frequency trading to hedge between carbon trading and the green energy stock market. What is more, the hedging effects are heterogenetic and investors should adjust their hedging strategies in different quantiles.
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