How Does the Time-Varying Network Structure Evolve between the EU Carbon Futures Prices and Industrial and Energy-Related Indices? A Study Based on a Time-Varying T-Copula

Abstract

Industrial and energy-related industries are major sources of carbon dioxide emissions, and their interdependence, as reflected in the financial field, has attracted the attention of scholars. For the purpose of exploring the evolutionary characteristics of the short-term dynamic correlation coefficient between the EU carbon futures price and the industrial and energy-related indices, this paper selected the settlement price of EU carbon emission quota futures, the MSCI energy I index on three dimensions, and the Dow Jones industrial index and West Texas crude oil futures price, as sample data. Using the time-varying t-copula model to measure the dynamic correlation coefficient between variables, the time-sliding window idea and coarse-grained method were combined to establish the correlation fluctuation mode, and a complex network theory and analysis methods were used to study the evolutionary traits of the time-varying network structure between the EU carbon price and the industrial and energy-related index. The results show that the transmission objects of the key correlation fluctuation modes in the network are stable and maintain their own state with a high probability. Second, the clustering effect exists in the transmission process. Some nodes with high mediating abilities are also the key correlation wave modes in the dynamic correlation evolution network. This study provides ideas for the study of the correlations between multiple variables and is also a useful reference for international investors.