Connectedness of global energy markets with global agricultural, natural resources, and socially responsible investments using extended GFI

Abstract

Purpose

The study aims to investigate the risk transmission from COVID-19 to global agriculture, energy, natural resources/mining and environmentally/socially responsible investments. Additionally, it explores the connectedness of global energy indices with global agriculture, natural resources/mining and environmentally/socially responsible investments. The study develops a new COVID-19-based Global Fear Index (GFI) to achieve the objectives, thus contributing to the prevailing literature.

Design/methodology/approach

The data of Global indices are selected from January 2020 to December 2021. The study uses multivariate BEKK-GARCH and TVP-VAR models to explore COVID-19 risk transmission and connectedness between global indices.

Findings

Significant shock and volatility transmissions from COVID-19 to all global indices are observed. Results show that global agriculture, natural resource/mining markets and environmentally and socially responsible investments are safe havens during COVID-19. Furthermore, these global investment choices are barely connected with global energy indices.

Practical implications

Portfolio managers and investors should invest in global indices to gauge the risk-adjusted return during the pandemic and upcoming health-related risks. Investors in energy sectors are advised to diversify the risk by adding safe-haven assets to their portfolios.

Social implications

The findings shed light on the importance of environmentally and socially responsible investments as a separate asset class where ecologically friendly and socially sentimental investors could invest in diversifying the risk of their portfolios.

Originality/value

The paper offers valuable insights to policymakers and investors regarding asset pricing, risk management and financial market stability during pandemic-type emergencies.

Citation

Shahid, M.N. (2024), "Connectedness of global energy markets with global agricultural, natural resources, and socially responsible investments using extended GFI", Journal of Financial Economic Policy, Vol. 16 No. 5, pp. 601-625. https://doi.org/10.1108/JFEP-02-2024-0035