Connectedness and portfolio management between renewable energy tokens and metals: Evidence from TVP-VAR approach
The rise of new types of renewable digital assets in the recent decade has spurred international investors to explore their inclusion in portfolios for optimal returns. Therefore, this study investigates the interconnections between renewable energy tokens, precious metals, and industrial metals using an innovative TVP-VAR framework. The findings reveal that the relationships between energy tokens and precious/industrial metals are relatively weaker compared to those among conventional precious and industrial metals. The linkages between markets under inquiry increased during the Covid-19 pandemic. Energy tokens, along with palladium, aluminum, lead, and tin, are receivers of net return spillovers, while the other precious and industrial metals, namely gold, silver, platinum, zinc, copper, and nickel, export net return spillovers. The transmission of returns between these markets varies over time, particularly experiencing significant variations during the pandemic period. Notably, the connectedness based on volatility is stronger than that based on returns. The optimal portfolio analysis demonstrates that the inclusion of energy tokens in a metals-based portfolio presents diversification opportunities. These findings provide valuable insights for policymakers and portfolio managers in terms of market stability and portfolio setting and adjustments, and hedging strategies.
Ali, Shoaib; Ijaz, Muhammad Shahzad; Yousaf, Imran; and Li, Yanshuang, "Connectedness and portfolio management between renewable energy tokens and metals: Evidence from TVP-VAR approach" (2023). Kean Publications. 29.