Do clean energy stocks and sub-sectors hedge China economic policy uncertainty: New evidence from wavelet analysis

Abstract

This study aims to investigate the hedging properties of aggregate clean energy markets and their subsectors against China economic policy uncertainty from September 14, 2012, to June 16, 2022. We employed wavelet coherence with a phase difference to explore the time-frequency relationship between our chosen markets. Meanwhile, strong time-varying connectedness is observed between clean energy indices against China economic policy uncertainty, especially during market turmoil. In addition, asymmetric patterns in the interconnections of all markets are more evident between 4 and 64 days. However, fuel cells, green IT, and energy management sub-sectors are act as a strong hedge against economic policy uncertainty. In contrast, the global, US, and European aggregate clean energy markets act as strong hedge during different periods. Based on these empirical findings, this research proposes several important implications for energy investors, market regulators, and other market participants to make more informed decisions about their portfolio risk.