International Business and Entrepreneurship Faculty Publications
Document Type
Article
Publication Date
9-21-2026
Abstract
Purpose: This paper aims to examine the daily financial risk spillovers associated with investing in critical minerals. It examines the dynamic interconnectedness between seven critical mineral Exchange-Traded Fund (ETF) portfolios and key economic-wide variables, including the energy market, carbon emissions, market sentiment and global infrastructure.
Design/methodology/approach: A time-varying parameter vector autoregression (TVP-VAR) model is used to quantify dynamic connectedness and directional volatility spillovers using daily data from May 1 2013, to May 2 2023. The study isolates the impact of extreme events by splitting the data into pre- and post-COVID-19 samples based on the February 2020 stock market crash.
Findings: Portfolios with high Environmental, Social and Governance (ESG) scores significantly contribute to shock spillovers. Net directional connectedness analysis reveals that West Texas Intermediate (WTI) crude oil and carbon emission futures consistently act as “net receivers,” absorbing volatility from the system. Conversely, Cobalt and Aluminum ETFs primarily act as “net givers,” transmitting volatility. The pandemic caused significant structural shifts in these transmission roles.
Practical implications: The identification of specific net givers and receivers provides actionable insights for investors, facilitating better hedging strategies against time-varying structural breaks and broader economic shocks.
Originality/value: This study uniquely uses financial ETF data rather than physical mineral prices to capture accessible investment risks. It is among the first to link ESG scores to the directional role (giver vs receiver) of critical mineral assets within a broader macrofinancial network.
Recommended Citation
Wang, H., S. Sua, L., Ortiz, J., Huang, J. and Alidaee, B., 2026. Energy market and carbon emission spillovers in critical minerals investment: a dynamic connectedness approach. Studies in Economics and Finance, pp.1-28. https://doi.org/10.1108/SEF-01-2026-0022
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Publication Title
Studies in Economics and Finance
DOI
10.1108/SEF-01-2026-0022
Comments
© 2026 Haibo Wang, Lutfu S. Sua, Jaime Ortiz, Jun Huang and Bahram Alidaee.
Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors.