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Uncertainty and Stock Returns in Energy Markets: A Quantile Regression Approach

Author

Listed:
  • Samir Cedic

    (Linköping University)

  • Alwan Mahmoud

    (Linköping University)

  • Matteo Manera

    (University of Milano-Bicocca, Fondazione Eni Enrico Mattei)

  • Gazi Salah Uddin

    (Linköping University)

Abstract

The aim of this paper is to analyze the relationship between different types of uncertainty and stock returns of the renewable energy and the oil & gas sectors. We use the quantile regression approach developed by Koenker and d’Orey (1987; 1994) to assess which uncertainties are the potential drivers of stock returns under different market conditions. We find that the bioenergy and the oil & gas sectors are most sensitive to uncertainties. Both sectors are affected by financial, euro currency, geopolitical and economic policy uncertainties. Our results have several policy implications. Climate policy makers can prioritize policies that support bioenergy in order to reduce the potentially negative effects of uncertainties on bioenergy investment. Investors aiming to diversify their portfolio should be aware that many uncertainties are common drivers of bioenergy and oil & gas returns, the connectedness between assets of these energy types could therefore increase when uncertainty increases.

Suggested Citation

  • Samir Cedic & Alwan Mahmoud & Matteo Manera & Gazi Salah Uddin, 2021. "Uncertainty and Stock Returns in Energy Markets: A Quantile Regression Approach," Working Papers 2021.11, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2021.11
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    References listed on IDEAS

    as
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    Cited by:

    1. Sarit Maitra, 2023. "Impact of Economic Uncertainty, Geopolitical Risk, Pandemic, Financial & Macroeconomic Factors on Crude Oil Returns -- An Empirical Investigation," Papers 2310.01123, arXiv.org, revised Oct 2023.

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    More about this item

    Keywords

    Uncertainty; Macroeconomic Conditions; Renewable Energy; Stock Returns; Quantile Regression;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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