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Dynamic correlations between oil prices and the stock prices of clean energy and technology firms: The role of reserve currency (US dollar)

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  • Kocaarslan, Baris
  • Soytas, Ugur

Abstract

There is increased interest in the dynamic relationships between the stock prices of clean energy and technology firms and oil prices in the literature. Existing works suggest a time-dependent link between them, but there is a gap of knowledge regarding the drivers of this time-dependent relationship. To contribute to this literature, we first identify dynamic conditional correlations (DCCs) between the prices of clean energy and technology stocks and oil prices to investigate the nature of these dynamic correlations. Our findings suggest the existence of significant asymmetric effects in the DCCs. Using the autoregressive distributed lag (ARDL) model, we then investigate the impact of reserve currency (US dollar) value changes on the DCCs while also controlling for business cycles, monetary conditions, and financial stress. Our results highlight the dominant role of US dollar appreciations in driving the DCCs. This role intensifies when asymmetric impacts are taken into account. The implications of this study are important for clean energy investments and for optimal risk management strategies in the energy and financial markets.

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  • Kocaarslan, Baris & Soytas, Ugur, 2019. "Dynamic correlations between oil prices and the stock prices of clean energy and technology firms: The role of reserve currency (US dollar)," Energy Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s014098831930283x
    DOI: 10.1016/j.eneco.2019.104502
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    More about this item

    Keywords

    Clean energy stock prices; Oil prices; ARDL model; Asymmetric dynamic conditional correlations; Reserve currency (US dollar);
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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

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