Spillovers in the joint system of conditional higher-order moments: US evidence from green energy, brown energy, and technology stocks

Abstract

This study analyses the spillover in higher-order moments covering volatility, skewness, and kurtosis in the space of green energy, brown energy, and technology stocks in the US from May 8, 2006 to May 18, 2022. The analysis shows four noteworthy findings. Firstly, besides volatility, spillovers of skewness and kurtosis are important. Secondly, spillovers fluctuate with time and intensify during crisis periods, especially around the oil price crash of 2015. Thirdly, clean energy is the major net transmitter of volatility and kurtosis shocks; wind energy and crude oil are the major net transmitters of volatility and skewness shocks, whereas solar energy plays the same role for skewness spillovers. Fourthly, the spillover analysis based on the three moments jointly estimated in the same system indicates that the combined contribution of cross spillovers of volatility, skewness, and kurtosis to the total spillover index constitutes more than 40%. These results provide new insights for investors and policymakers necessary for making comprehensive inferences about asset pricing, portfolio risk management, and market stability under the energy transition. They suggest that if the spillover channels of skewness and kurtosis are overlooked, the risk propagation across these markets will be underestimated, potentially jeopardizing financial stability.