A1368
Title: Multiresolution analysis of climate risk spillovers
Authors: Fabio Parla - University of Palermo (Italy) [presenting]
Andrea Cipollini - University of Palermo (Italy)
Iolanda Lo Cascio - University of Palermo (Italy)
Abstract: The focus of this study is on the climate risk implications for financial stability using the Diebold-Yilmaz connectedness approach. In particular, a methodology of another study is employed based on the computation of the marginal contribution to R2. For this purpose, data for Europe and the US on Exchange-Traded Funds (ETFs) tracking "green" and "brown" stock portfolios are used. ETFs are an innovative financial instrument providing benefits to investors in terms of diversification (by tracking a basket of stocks), and given their broad coverage, they also typically feature low management fees and transaction costs. Contribution to the literature is twofold. First, while previous studies on ETF spillovers have focused only on world stock portfolios, the roles played by Europe and the US (tracking different environmental regulation policies) are disentangled. Moreover, using the multiresolution analysis approach put forward by the prior study, the focus is on the analysis of (total and directional) connectedness in a time-frequency framework. More specifically, the analysis studies ETF spillovers across frequency bands (associated with different investment horizons) and also examines their evolution over time.
