Spillover and dependence between Chinese carbon and new energy stock markets: A cross-quantile perspective

The interplay between China's carbon emissions trading market and the new energy stock market has attracted increasing scholarly attention, given their alignment with green and sustainable development goals . This study utilizes the Cross-Quantilogram methodology to assess predictability and spillover dynamics in the Chinese carbon markets and the new energy stock markets across various quantiles . The analysis yields some significant findings: (1) Despite the small magnitude, bidirectional spillover effects are discernible between China's carbon market and the Chinese new energy market, with heterogeneous correlation among the three pilot carbon markets. (2) The cross-quantile correlation among markets exhibits varying dynamics with increasing lag orders. (3) During market downturns, the new energy market poses short-term abnormal extreme risks as a spillover source for the Guangdong carbon market, while exhibiting a stronger spillover effect on the Hubei carbon market during longer lag periods. (4) Certain sectors, such as the wind power, nuclear power, and photovoltaic sectors, stand out with a more pronounced cross-quantile in relation to the carbon market. (5) Both risk events and policy changes play a significant role in shaping market interactions. (6) Including Guangdong and Hubei carbon asset in a portfolio can effectively reduce the volatility risk of new energy stock portfolios. A valuable comprehension of the intricate interdependencies between China's carbon market and new energy assets is provided by this research, benefiting policymakers and investors in the energy and environmental sectors.