The volatility spillover between battery metals and future mobility stocks: Evidence from the time-varying frequency connectedness approach

Abstract

The transition to clean energy in the mobility sector, like other green solutions, necessitates a heightened dependence on critical minerals. The escalating demand for minerals, coupled with supply-side challenges, intensifies the price volatility of battery metals, which are crucial for ensuring sustainable production in the future mobility ecosystem. This paper examines the volatility connectedness between battery metals prices and stock prices of corporations engaging in future mobility between March 20, 2012, and March 2, 2022. We analyze the volatility of six base metals (i.e., aluminum, copper, lead, nickel, tin, and zinc), three minor metals (i.e., lithium, cobalt, manganese), and the Solactive Electric Vehicles and Future Mobility Index. We employ the novel frequency connectedness framework to identify the volatility spillovers and contagion among the variables across different investment horizons in a time-varying fashion. The future mobility equity market is a net volatility recipient, and copper and lithium are the dominant net volatility transmitters, emphasizing the pivotal role of battery metals in shaping the dynamics of the future mobility industry. We construct a minimum connectedness portfolio, offering significant hedging effectiveness for market participants. Finally, policy implications are discussed.