A1483
Title: Sector risk in the European stock market: Navigating the energy transition era
Authors: Jone Ascorbebeitia - University of the Basque Country UPV/EHU (Spain) [presenting]
Susan Orbe - University of the Basque Country (Spain)
Eva Ferreira - University of the Basque Country (Spain)
Abstract: The energy transition is reshaping stock market dynamics, influencing stock valuations and market trends, and creating new sectoral risks and opportunities, particularly in Europe, where regulatory policies and green initiatives are key drivers. The dependence structure of sectors is examined in the European stock market over the past decade. In particular, the time-varying multivariate dependence is studied between European MSCI sector indexes and special attention is paid to the energy producer and distributor sectors group (P\&D) and energy consumer sectors group, obtaining that, as expected, there are high multivariate dependences in recession periods. CoVaR is used to measure the sector risk. The Energy sector is highlighted as the most systemically damaged sector, showing that the risky quantiles of the P\&D sectors have the highest negative impact, generating, on average, a 5.4\% return loss on the European market in the post-COVID era. Moreover, the results suggest a common spillover effect of sectors on the European market risk. It is obtained that this effect is to reduce market returns by about 3\%, not too far from the individual impact of the sectors, which, on average, is around 4\%.
