Zhenhua Liu , Yushu Wang , Xinting Yuan , Zhihua Ding , Qiang Ji
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Abstract
Geopolitical risk, as a key determinant of energy supply, greatly influences the vulnerability of energy markets. This study develops a novel energy market vulnerability index—which measures the level and dynamics in vulnerability of energy markets from market risk perspective—using a quantile connectedness approach for the first time. Then, by introducing a generalized autoregressive conditional heteroskedasticity–mixed-data sampling (GARCH-MIDAS) model, we explore the impact and predictive role of geopolitical risk on the vulnerability of energy markets. We find that the vulnerability of energy markets showed an upward trend and fluctuated considerably during 2007–2024. Moreover, geopolitical risk positively affects the vulnerability of energy markets. Finally, the vulnerability of energy markets can be forecasted better by the predictor, geopolitical risk. Our results offer useful insights for investors and policy-makers in the energy markets.
期刊介绍：
Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.
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