Wavelet analysis of the relationship between energy prices and stock indices of high ESG-rating companies: Investment diversification opportunities

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Our research is the first attempt to identify relationships between «Brent» oil and natural gas prices and indices of stocks of companies with high ESG-ratings (ESG-leaders) in the time and frequency domains. We use such methods in the wavelet analysis framework as analysis of quadratic wavelet coherence and phase difference between data series. Our study is based on daily data from 2018 to the beginning of 2024, which allows us to cover periods of relative macroeconomic stability (until 2020), the COVID-19 coronavirus pandemic (2020–2021) and growing geopolitical tensions in the world (from 2022). We consider ESG-indices of the global market, US and EU markets. Our study shows areas of low and high consistency between energy prices and ESG-leaders’ indices for the three periods under examination and identifies lag and lead relationships between the two considered asset classes. Identifying areas of low consistency allows an investor to develop investment diversification strategies, including hedging against drops in oil and gas prices during global crises. We find that global and US ESG-leaders’ indices provide opportunities for diversifying investments in natural gas futures.

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作者简介

Т. Sokolova

National Research University “Higher School of Economics”

编辑信件的主要联系方式.
Email: tv.sokolova@hse.ru
俄罗斯联邦, Moscow

S. Gurov

National Research University “Higher School of Economics”

Email: sgurov@hse.ru
俄罗斯联邦, Moscow

V. Medvedev

National Research University “Higher School of Economics”

Email: medvedev.v@hse.ru
俄罗斯联邦, Moscow

V. Lysenko

National Research University “Higher School of Economics”

Email: vlysenko@hse.ru
俄罗斯联邦, Moscow

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2. Fig. 1. Dynamics of time series

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3. Fig. 2. Moving correlation between daily yields of Brent crude oil and Henry Hub natural gas

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4. Fig. 3. Relationship between Brent crude oil returns and the returns of the Global Market Index of High ESG-rated Companies (GSIN Index)

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5. Fig. 4. Correlation between Brent crude oil returns and the returns of the index of US companies with high ESG rating (USSLM Index)

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6. Fig. 5. Correlation between “Brent” oil return and the return of the index of EU companies with high ESG-rating (EUSI Index).

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7. Fig. 6. Correlation between Henry Hub natural gas returns and the returns of the GSIN Index (GSIN Index), an index of high ESG-rated global market companies

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8. Fig. 7. Relationship between natural gas returns (“Henry Hub”) and the returns of the US High ESG-rated Global Market Companies Index (USSLM Index)

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9. Fig. 8. Relationship between natural gas futures returns (“Henry Hub”) and the returns of the EUSI Index of EU companies with high ESG ratings

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