Abstract/Summary

This thesis encompasses of three empirical chapters targeting energy prices, labour market outcomes and volatility of stock market returns. The first chapter employs a modern GARCH framework to investigate the association between crude oil prices, sectoral stock market returns, the macroeconomy, precious metals and cryptocurrency. Pre COVID-19, findings reveal that oil-exporting countries share the same significant positive correlation between oil prices and all sectoral stock returns (aside from Canadian energy and United States telecommunication sectors). A significant positive (negative) volatility correlation between Bitcoin (3-month deposit rate) and oil prices is also detected. Results are rather ambiguous for oil-importing countries. However, during the pandemic sectoral stock market returns of all countries share the same significant positive correlation (aside from Canadian energy sector) with oil prices. A transition from significant positive volatility correlation between Bitcoin and oil prices to an insignificant one was uncovered for all countries. Yet, no change was reported between oil prices and the 3-month deposit rate. Finally, gold and oil prices are found to be significantly positively correlated while it is ambiguous for the nominal effective exchange rate before and during the pandemic. The second chapter uses multiple GARCH techniques to model returns volatility of the FTSE4Good USA (F4GU) index and eleven sectoral stock indices of United States’ main trading partners. A VAR framework is then constructed to examine returns volatility spillover effect of the F4GU index on sectoral stock indices of Canada, the United Kingdom and Japan. All sectoral stock indices (aside from Canadian health care, British real estate, financials, information technology and consumer discretionary) reveal a positive response shock to a sudden increase in volatility of returns in the F4GU index. The spillover effect is greatly pronounced between 5 to 15 days for all three countries. In addition, returns volatility of the F4GU index explains more than 14%, 3.5% and 5% of the returns volatility in most Canadian, British, and Japanese sectoral stock indices respectively on the 25th day period. The explanation with the highest empirical support corresponds to the real estate sector of Canada and Japan at 18.6% and 28% while it’s health care for the United Kingdom at 9% on that particular day. The last chapter conducts an event study to evaluate impacts of the Regional Greenhouse Gas Initiative (RGGI) on the United States’ labour market outcomes. It undertakes a comparison to account for differences between the effect on states which enforced the policy versus those that did not. Results show a noticeable decline in annual income from wages of unskilled workers (without a college or high school degree) in energy intensive sectors. On average, the decline in annual wages accounts for about 7% 4 years after the reform. However, no effect was detected for skilled workers in these sectors. Similarly, there weren’t any significant impacts of RGGI on average weeks worked and probability of unemployment, nor on wages and employment status of workers in non-energy intensive sectors.