The spillover effects in the "Energy-Carbon-Stock" system-Evidence from China

This paper integrates China's energy market, carbon emission trading market, and stock market of energy-intensive sectors into one framework based on a system perspective. We quantify the return and volatility spillover effects respectively, and deeply examine the structures and driving factors of these two spillovers. Our findings demonstrate that (i) the spillover linkage in the "Energy - Carbon - Stock" system is considerable, particularly the return spillover connectedness; (ii) the stock market occupies a dominant position in the system and primarily serves as a net transmitter in the spillover structure; (iii) policy adjustment and energy market turbulence are the main driving events for the sharp rise of the overall spillover; (iv) there exists an obvious cluster effect in the spillover network structure, and the occurrence of major events will make the most affected assets move to the network center and become the main spillover sources; (v) the state of the energy market, the stock market stability and the monetary policy orientation all have a strong explanatory power for the overall spillover. Our research provides useful implications for policy makers, energy-intensive industries and green investors.