Dynamics of extreme spillovers across European sustainability markets

Abstract

This study examines the asymmetric spillovers, quantile connectedness, and dynamic inter-dependence structures among the leading European Dow Jones sustainability markets (Belgium, Europe, Finland, France, Germany, Italy, the Netherlands, and Spain). We used the quantile cross-spectral approach of Barunik and Kley (Econom J 22:131–152, 2019) and the quantile connectedness analysis of Ando et al. (Manag Sci, 2022) to achieve our objectives. The results show a positive short-term dependence between European and country-level sustainability markets during bearish and bullish market scenarios. The dependence is higher in the long term than in the short and intermediate terms in bearish markets than that for bullish markets. The return spillover is higher during bearish market conditions than during bullish ones. The sustainability indices of Belgium, Italy, the Netherlands (only at lower quantiles), and Finland are net receivers in the system under bearish and bullish market conditions, whereas the remaining indices are net return transmitters in the system.