Does market sentiment and global uncertainties influence ESG-oil nexus? A time-frequency analysis

• Published in: Resources policy 2023-10, Vol.86, p.104130, Article 104130
• Main Authors: Bhattacherjee, Purba, Mishra, Sibanjan, Kang, Sang Hoon
• Format: Article
• Language: English
• Subjects: Economic political uncertainty; ESG; Financial stress index; Oil price; Volatility index; Wavelet coherence
• ISSN: 0301-4207
• DOI: 10.1016/j.resourpol.2023.104130

This study investigates the influence of market sentiment and global uncertainties on the ESG-oil nexus for ten developed and eleven emerging countries from 4/1/2016 to 1/31/2023. Using bi-variate, partial and multiple wavelet coherence analysis, this study finds some insightful results: First, the ESG-oil nexus shows higher coherency, specifically during the health crisis period of COVID-19. Second, there is a diffusion of coherency between the networks, while controlling market sentiment (VIX and OVX) and global risks (EPU and OFR-FSI). Lastly, we find that the interaction effect of oil and uncertainties intensified the coherency. These results signal that market sentiment and global uncertainties are significant drivers influencing the ESG-oil nexus. The findings are important from a portfolio management and risk diversification perspective. •This study investigates the influence of market sentiment and global uncertainties on the ESG-oil nexus.•The higher coherency of the ESG-oil nexus is pronounced during the health crisis period of COVID-19.•The interaction effect of oil and uncertainties intensified the coherency.•The market sentiment and global uncertainties are significant drivers influencing the ESG-oil nexus.