Dynamic asymmetric optimal portfolio allocation between energy stocks and energy commodities: Evidence from clean energy and oil and gas companies

This paper investigates returns and volatility transmission between SPGCE (S&P Global Clean Energy), SPGO Oil), two non-renewable energy commodities (natural gas crude oil), three products of oil distillation (heating oil, gasoline, propane). We estimate a VAR(1) asymmetric BEKK-MGARCH(1,1) using daily U.S. data from March 1, 2010, to February 25, 2020. The empirical findings reveal vast heterogeneity in spillover patterns returns, volatilities, shocks. employ the results derive optimal portfolio weights, hedge ratios, effectiveness measures for diversified portfolios. find dynamic diversification advantages commodities, especially heating energy-related stock markets. also that stocks possess highest average weight hedging each other, implying positive performance considerably compensates negative stocks. For investors regulators, advancement implementation clean programs policies, while reducing environmental debt enhancing “green” growth sustainable development, provide instruments strategies equity risks inherent industry. • analyze various transmission. strong mean spillovers SPGO. several effects spillovers. Our can inform managers assessing opportunities. view support policies energies as dual-purpose policies.