Climate uncertainty and green index volatility: Empirical insights from Chinese financial markets

Abstract

This study investigates the influence of climate uncertainty on green index volatility (e.g., the China Low Carbon Index (CLC), CSI Green Investing Index (GI), CSI Environmental Governance Index (EG), SSE Social Responsibility Index (SR), and SSE Corporate Governance Index (CG)) by employing three climate uncertainty indicators: Chinese climate policy uncertainty (CPU), Chinese climate uncertainty (CU), and the US climate policy uncertainty index (UCPU). Employing an autoregressive (AR) model extended with climate uncertainty indicators for forecasting, our empirical findings shed light on the substantial predictive power of CPU and CU over green indices while highlighting the limited effectiveness of UCPU.