TIME-VARYING CONNECTEDNESS BETWEEN GREEN MARKETS AND CABLE NEWS-BASED ECONOMIC POLICY UNCERTAINTY: EVIDENCE FROM A TVP-VAR CONNECTEDNESS APPROACH

Purpose- Governments and businesses worldwide are actively driving the growth of green finance (GF) markets as part of their goals towards a natural, sustainable, zero-carbon economy. Along with the turbulent events and developments in global markets, economic policy uncertainty (EPU) levels are constantly increasing, leading to significant spillover shocks on various economic and financial factors. Accordingly, this research aims to identify the dynamic connectivity between cable news-based EPU (TVEPU) and green asset returns, considering the period between 01.10.2014 and 30.09.2024. Methodology- This research employs the TVP-VAR connectedness method to examine the nexus between TVEPU and the returns of green assets. This approach enables the estimation of a generalized connectedness procedure using variance-covariance matrices and time-varying coefficients. Additionally, by applying Wold's representation theorem, it calculates generalized impulse response functions (GIRF) and variance decompositions (GFEVD) to predict the connectedness indices between the variables. Findings- First, we observe that the Fossil Fuel Reserves Free index has the highest influence on other indices while the TVEPU index has the lowest impact on other indices. Second, we find that shocks from international events and news significantly increase the sensitivity of the spillover effects between green assets and TVEPU. Third, we demostrate that the Green Bond (GB) market is a net shock receiver; simultaneously, the Fossil Fuel Reserves Free, Sustainability World and Environmental and Social Responsibility indices are net shock transmitters. Moreover, the findings demonstrate that the net spillover of TVEPU, Global Clean Energy, Carbon Emission Allowances (CEAs) and Renewable Energy and Clean Technology indices changes over time. Fourth, we determine that TVEPU has a meagre impact on the returns of green stocks (GSs) and GBs. Conclusion- This research provides strong evidence that news from wired news networks also impacts uncertainty shocks, emphasising that green asset investors should determine their portfolio diversification and hedging strategies by considering this factor. Keywords: TVEPU, green financial markets, sustainable assets, dynamic connectedness, TVP-VAR based connectedness technique. JEL Codes: D53, E60, Q56