Tail Dependence Structure and Risk Spillover Effects Among Climate Policy Uncertainty, Investor Sentiment, and Financial Risk—From the Perspective of Machine Learning

Against the backdrop of intensifying global climate change, climate policy uncertainty (CPU) and investor sentiment have become critical factors influencing the stability of financial markets. In this study, a quantitative index of investor sentiment is constructed using stock trading volume, turnover rate, price-to-earnings ratio, circulating market value, and the consumer confidence index. The QVAR-DY model is employed to analyze the risk contagion mechanisms among CPU, investor sentiment, and China’s financial sub-markets across different quantiles. Furthermore, five machine learning models—LSTM, BiLSTM, CNN, XGBoost, and LightGBM—are used to forecast risk spillover indices, and their performance is compared with three benchmark models (ARIMA, Persistence, and HistMean) to systematically evaluate the advantages of machine learning models in capturing tail risk spillover effects. The findings reveal significant cross-market risk contagion in financial markets, characterized by asymmetry. The level of risk spillover under extreme conditions is substantially higher than under normal conditions, indicating high sensitivity to extreme events and major policies. CPU exhibits the most pronounced spillover effect on the money market, while investor sentiment has the greatest impact on the stock market. The stock, real estate, and commodity markets act simultaneously as sources of risk and receivers of shocks. In terms of forecasting performance, LightGBM performs best under normal conditions, whereas LSTM achieves the highest prediction accuracy under extreme conditions.