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The dynamics of returns on renewable energy companies: A state-space approach

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  • Inchauspe, Julian
  • Ripple, Ronald D.
  • Trück, Stefan

Abstract

The renewable energy sector has accomplished remarkable growth rates over the last decade. This paper examines the dynamics of excess returns for the WilderHill New Energy Global Innovation Index, which lists firms in the renewable energy sector and is used as a global benchmark. We propose a multi-factor asset pricing model with time-varying coefficients to study the role of energy prices and stock market indices as explanatory factors. Our results suggest a strong influence of the MSCI World index and technology stocks throughout the sample period. The influence of changes in the oil price is significantly lower, although oil has become more influential from 2007 onwards. We also find evidence for underperformance of the renewable energy sector relative to the considered pricing factors after the financial crisis.

Suggested Citation

  • Inchauspe, Julian & Ripple, Ronald D. & Trück, Stefan, 2015. "The dynamics of returns on renewable energy companies: A state-space approach," Energy Economics, Elsevier, vol. 48(C), pages 325-335.
    • Handle: RePEc:eee:eneeco:v:48:y:2015:i:c:p:325-335
    DOI: 10.1016/j.eneco.2014.11.013
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    More about this item

    Keywords

    Renewable energy; Oil price; State-space models; CAPM; WilderHill New Energy Global Innovation Index;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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