Abstract
This paper employs wavelet coherence, Cross-Quantilogram (CQ), and Time-Varying Parameter Vector-Autoregression (TVP-VAR) estimation strategies to investigate the dependence structure and connectedness between investments in artificial intelligence (AI) and eight different energy-focused sectors. We find significant evidence of dependence and connectedness between the stock returns of AI and those of the energy-focused sectors, especially during intermediate and long-term investment horizons. The relationship has become stronger since the COVID-19 pandemic. More specifically, results from the wavelet coherence approach show a stronger association between the stock returns of energy-focused sectors and AI, while results from the CQ analysis show that directional predictability from AI to energy-focused sectors varies across sectors, investment horizons, and market conditions. TVP-VAR results show that since the COVID-19 outbreak, AI has become more of a net shock receiver from the energy market. Our study offers crucial implications for investors and policymakers.