Energy Market Risk Management under Uncertainty: A VaR Based on Wavelet Approach

Authors

  • Huthaifa Sameeh Alqaralleh Mutah University
  • Ahmad Al-Saraireh Mutah University
  • Alessandra Canepa

Abstract

This study contributes to the literature on energy market risk management and portfolio management by examining co-movements between several energy commodities in a portfolio context in light of the impact of several types of uncertainty over time and under high, medium, and low frequencies. Using of wavelet decomposition analysis, we first investigate the lead-lag relationship together with the power of the correlation over time between major renewable and non-renewable energy indexes and uncertainty indexes. Second, we explore the contribution of uncertainty to the energy portfolio. Our procedure reveals that a dependent relationship generally exists between energy returns and changes in uncertainty. The risks of clean energy and crude oil returns are more sensitive to financial uncertainties, whereas investing in GAS markets offers market diversification opportunities during periods of energy uncertainty. 

Keywords: VaR Based on Wavelet Approach; Energy market, Uncertainty

JEL Classifications: C580; G15; E440.

DOI: https://doi.org/10.32479/ijeep.11404

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Author Biographies

Huthaifa Sameeh Alqaralleh, Mutah University

Assistant Professor, Department of Economics, Business and Finance

Ahmad Al-Saraireh, Mutah University

Assistant Professor,  Department of Banking and Finance

Alessandra Canepa

University of Turin, Department of Economics and Statistics Cognetti De Martiis, Lungo Dora Siena, 100 A, 10153, Turin, Italy.AndBrunel University London,Department of Economics and Finance, Marie Jahoda Building, Uxbridge, UB83PH, United Kingdom.

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Published

2021-08-20

How to Cite

Alqaralleh, H. S., Al-Saraireh, A., & Canepa, A. (2021). Energy Market Risk Management under Uncertainty: A VaR Based on Wavelet Approach. International Journal of Energy Economics and Policy, 11(5), 130–137. Retrieved from https://econjournals.com/index.php/ijeep/article/view/11404

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