Riding the Green Wave: How Clean Energy Is Reshaping China's Stock Market

Abstract

The clean energy industry has recently garnered marked attention, as it does not only mitigate greenhouse gas (GHG) emissions, but it also serves as a novel investment avenue, which may propel the size of the stock market. With this backdrop, this study aims to assess whether clean energy augments the size of the stock markets in China, utilizing the wavelet coherence (WCA) and the Breitung-Candelon spectral causality approaches. The empirical analysis shows that clean energy has significant positive effect on the development of both the Shanghai and the Shenzhen stock markets across different times and frequencies. The spectral causality approach further affirms the lead-lag relationship between clean energy and China's stock market development across different frequencies. Based on these findings, we suggest that the Chinese government should pave the way for clean energy projects, which will bolster both domestic and foreign investment, eventually, boosting China's stock growth. The study offers actionable insights for environmentally conscious and energy investors. It highlights the significance of clean energy in China's stock market for achieving sustainable development in China.