Dynamic interconnection and risk transmission between Chinese ESG stocks and key industry stocks: Evidence from VAR...

The global ESG market has attracted extensive attention; however, research on ESG investment in emerging economies is severely lacking, particularly in the relationship between traditional industries, such as the chemical industry and machinery manufacturing, ocean-based economic sectors, and ESG stocks. In this paper, TVP-VAR, rolling VAR, and QVAR models are incorporated into a unified analysis framework, and the static and dynamic spillover relationships between chemical, machinery manufacturing, ocean economy, and ESG stocks are systematically analyzed using the daily closing price data of Chinese A shares. The results show that in the three ESG portfolio networks formed by ESG50, ESG300, and ESG500, chemical stocks are the primary source of systemic risk in returns. Machinery stocks primarily serve as a net risk transmitter. Ocean stocks are mainly net risk recipients. ESG stocks can be both risk absorbers and risk amplifiers, confirming the importance of ESG ratings. The total spillover index exhibits typical market state dependence characteristics and is significantly larger than the normal market in extreme declines or rises. This paper fills the research gap in the risk transmission mechanism between traditional industrial stocks, ocean economic stocks, and ESG stocks in emerging economies. Additionally, it offers investors an ESG portfolio strategy and methodological guidance.