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Deconstruction of the Green Bubble during COVID-19 International Evidence

Author

Listed:
  • Bikramaditya Ghosh

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University) Electronic City, Hosur Road, Bengaluru 560100, Karnataka, India)

  • Spyros Papathanasiou

    (Department of Economics, School of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sofokleous Street, 10559 Athens, Greece)

  • Vandita Dar

    (Symbiosis Institute of Business Management, Symbiosis International (Deemed University) Electronic City, Hosur Road, Bengaluru 560100, Karnataka, India)

  • Dimitrios Kenourgios

    (Department of Economics, School of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sofokleous Street, 10559 Athens, Greece)

Abstract

Bubbles are usually chaotic but can be predictable, provided their formation matches the log periodic power law (LPPL) with unique stylized facts. We investigated Green Bubble behaviour in the stock prices of a selection of stocks during the COVID-19 pandemic, namely, those with the highest market capitalization from a basket of North American and European green energy or clean tech companies and the S&P Global Clean Energy Index. Moreover, the biggest Exchange Traded Fund (TAN) by market capitalization was also considered. The examined period is from 31 December 2019 to 11 October 2021, during which we detected 35 Green Bubbles. All of these followed the LPPL signature while calibrated through the 2013 reformulated LPPL model. In addition, the average drawdown emerged as four times that of the regular S&P-500 stock index (108% vs. 27%) under stressed conditions, such as the COVID-19 pandemic (stylized fact). Finally, the aftermaths of Green Bubbles, unlike regular bubbles, are not destructive, as these bubbles increase economic activity and infrastructure spending and are hence beneficial for holistic growth (described as Social Bubble Hypothesis ). We document that there are benefits in adapting greener and more sustainable business models in energy production. Green and sustainable finance offers benefits and opportunities for stock exchanges, especially for energy stocks. As a result, many businesses are focusing on sustainability and adopting an eco-friendly business model, which helps the environment, helps sustainability and attracts investors.

Suggested Citation

  • Bikramaditya Ghosh & Spyros Papathanasiou & Vandita Dar & Dimitrios Kenourgios, 2022. "Deconstruction of the Green Bubble during COVID-19 International Evidence," Sustainability, MDPI, vol. 14(6), pages 1-18, March.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:6:p:3466-:d:772284
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    References listed on IDEAS

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