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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.

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.

Suggested Citation

  • Bohl, Martin T. & Kaufmann, Philipp & Stephan, Patrick M., 2013. "From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks," Energy Economics, Elsevier, vol. 37(C), pages 40-51.
    • Handle: RePEc:eee:eneeco:v:37:y:2013:i:c:p:40-51
    DOI: 10.1016/j.eneco.2013.01.006
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    More about this item

    Keywords

    Renewable energy stocks; Performance measurement; Speculative bubbles; Sup ADF test; Markov regime-switching ADF test;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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