VOLATILITY SPILLOVER BETWEEN HUBEI CARBON MARKET AND GREEN FINANCIAL MARKET: EVIDENCE FROM TVP-VAR-DY MODEL
Keywords:
Hubei carbon market, Green bond market, Green stock market, Volatility spillover effects, TVP-VAR-DY modelAbstract
In the context of the global climate crisis and China’s dual-carbon target, a Time-Varying Parameter Vector Autoregression-Diebold-Yilmaz (TVP-VAR-DY) model is employed to examine risk spillovers between Hubei carbon and green financial market from January 5th, 2016 to January 6th, 2025. According to the findings, Hubei’s carbon-green finance system exhibits moderate and time-varying volatility spillover. Green equities predominantly function as information transmitters, whereas green bonds act as receivers, showing risk concentration within the green stock-bond nexus rather than carbon-finance linkages. Then, exogenous shocks such as trade conflict, the COVID-19 pandemic and carbon policy adjustments amplify cross-market spillover intensity. These findings elucidate risk transmission mechanisms in climate-aligned markets, provide investors with portfolio rebalancing insights and enhance regulators’ systemic risk monitoring capabilities.References
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