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From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks

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  • Bohl, Martin T.
  • Kaufmann, Philipp
  • Stephan, Patrick M.
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    Abstract

    Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart four-factor alphas. The radical shift in Germany's energy policy following the 2011 Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 37 (2013)
    Issue (Month): C ()
    Pages: 40-51

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    Handle: RePEc:eee:eneeco:v:37:y:2013:i:c:p:40-51

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Renewable energy stocks; Performance measurement; Speculative bubbles; Sup ADF test; Markov regime-switching ADF test;

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    References

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    Cited by:
    1. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.
    2. Peter C. B. Phillips & Shu-Ping Shi & Jun Yu, 2013. "Testing for Multiple Bubbles 2: Limit Theory of Real Time Detectors," Working Papers CoFie-04-2013, Sim Kee Boon Institute for Financial Economics.
    3. Chen, Wenjuan & Bettendorf, Timo, 2013. "Are There Bubbles in the Sterling-dollar Exchange Rate? New Evidence from Sequential ADF Tests," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80002, Verein für Socialpolitik / German Economic Association.

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