Biodiversity risk and hotel stock returns: Global evidence from wavelet analysis

This paper aims to examine the dynamic correlation mechanisms between the S&P Global LargeMidCap Biodiversity Index (GBIO) and share prices of nine major global hotel groups. Based on daily data spanning from June 2019 to July 2025, the research utilises advanced econometric methods including wavelet local multiple correlation, wavelet coherence, wavelet quantile correlation, and rolling window wavelet correlation to reveal that biodiversity risk and hotel industry stock returns exhibit significant non-linear, time-varying, and frequency-dependent characteristics. Empirical results demonstrate that the two maintain a strong and stable positive correlation from a long-term investment perspective (exceeding 64 days), with correlation coefficients generally surpassing 0.8, whilst correlation weakens considerably at short-term scales (2–16 days). Cross-regional comparisons reveal that American hotel groups exhibit the strongest positive correlation with the biodiversity index (averaging 0.56), followed by European enterprises (averaging 0.45), with Asian enterprises showing the weakest correlation (averaging 0.27), reflecting the heterogeneity in ESG factor pricing efficiency across different capital markets. This association strengthened significantly following COVID-19, indicating that biodiversity has become a systematic factor influencing the long-term value of the hotel industry in the post-pandemic era. Portfolio optimization analysis reveals that incorporating GBIO into minimum variance portfolios achieves substantial risk reduction of 44–66% in VaR and hedging effectiveness of 68–89%, with optimal GBIO weights consistently around 0.92 or higher. The study provides crucial empirical evidence for investors' ESG investment decisions and policymakers' biodiversity conservation policy design.