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Fossil energy and clean energy stock markets under COVID-19 pandemic

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  • Yosra Ghabri
  • Ahmed Ayadi
  • Khaled Guesmi

Abstract

This paper analyses the dynamic impact of fossil energy shocks (crude oil and Natural gas) on renewable clean energy stock markets during the COVID-19 pandemic. Using a time-varying VAR model with stochastic volatilities, we conduct distinct analyses over the period from 10th March to 15th June 2020, while distinguishing between three sub-periods. Our key findings show a significant increase in the returns of clean energy stocks after the sharp collapse of crude oil prices. However, we find the opposite effect on renewable energy stock returns after the OPEC+ agreement. The results also indicate that the announcement of COVID-19 as a global pandemic caused the prices of both Natural gas and renewables to rise after a decrease. By contrast, after the crude oil shocks, there was no response of renewables to Natural gas shocks. Furthermore, the stochastic volatility reveals that after the OPEC-Russia agreements, the volatility of crude oil returns gets back to normal and steady fluctuation. Our results provide useful implications for policy-makers to mitigate the negative effects on renewable energy investments due the uncertainty related to the ongoing pandemic.

Suggested Citation

  • Yosra Ghabri & Ahmed Ayadi & Khaled Guesmi, 2021. "Fossil energy and clean energy stock markets under COVID-19 pandemic," Applied Economics, Taylor & Francis Journals, vol. 53(43), pages 4962-4974, September.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:43:p:4962-4974
    DOI: 10.1080/00036846.2021.1912284
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    Citations

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    Cited by:

    1. Rui Dias & Nuno Teixeira & Paulo Alexandre & Mariana Chambino, 2023. "Exploring the Connection between Clean and Dirty Energy: Implications for the Transition to a Carbon-Resilient Economy," Energies, MDPI, vol. 16(13), pages 1-21, June.
    2. Alkathery, Mohammed A. & Chaudhuri, Kausik & Nasir, Muhammad Ali, 2023. "Dependence between the GCC energy equities, global clean energy and emission markets: Evidence from wavelet analysis," Energy Economics, Elsevier, vol. 121(C).
    3. Li, Yiying & Yan, Cheng & Ren, Xiaohang, 2023. "Do uncertainties affect clean energy markets? Comparisons from a multi-frequency and multi-quantile framework," Energy Economics, Elsevier, vol. 121(C).
    4. Li, Hailing & Li, Yuxin & Zhang, Hua, 2023. "The spillover effects among the traditional energy markets, metal markets and sub-sector clean energy markets," Energy, Elsevier, vol. 275(C).
    5. Qi, Haozhi & Ma, Lijun & Peng, Pin & Chen, Hao & Li, Kang, 2022. "Dynamic connectedness between clean energy stock markets and energy commodity markets during times of COVID-19: Empirical evidence from China," Resources Policy, Elsevier, vol. 79(C).
    6. Tan, Xueping & Geng, Yong & Vivian, Andrew & Wang, Xinyu, 2021. "Measuring risk spillovers between oil and clean energy stocks: Evidence from a systematic framework," Resources Policy, Elsevier, vol. 74(C).
    7. Çelik, İsmail & Sak, Ahmet Furkan & Höl, Arife Özdemir & Vergili, Gizem, 2022. "The dynamic connectedness and hedging opportunities of implied and realized volatility: Evidence from clean energy ETFs," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    8. Lu, Xunfa & Huang, Nan & Mo, Jianlei & Ye, Zhitao, 2023. "Dynamics of the return and volatility connectedness among green finance markets during the COVID-19 pandemic," Energy Economics, Elsevier, vol. 125(C).
    9. Konstantin B. Kostin & Philippe Runge & Leyla E. Mamedova, 2022. "Validity of the Fama-French Three- and Five-Factor Models in Crisis Settings at the Example of Select Energy-Sector Companies during the COVID-19 Pandemic," Mathematics, MDPI, vol. 11(1), pages 1-13, December.
    10. Umar, Muhammad & Farid, Saqib & Naeem, Muhammad Abubakr, 2022. "Time-frequency connectedness among clean-energy stocks and fossil fuel markets: Comparison between financial, oil and pandemic crisis," Energy, Elsevier, vol. 240(C).
    11. Xiaoqing Huang & Xiaoyong Lu & Yuqi Sun & Jingui Yao & Wenxing Zhu, 2022. "A Comprehensive Performance Evaluation of Chinese Energy Supply Chain under “Double-Carbon” Goals Based on AHP and Three-Stage DEA," Sustainability, MDPI, vol. 14(16), pages 1-19, August.
    12. Farid, Saqib & Karim, Sitara & Naeem, Muhammad A. & Nepal, Rabindra & Jamasb, Tooraj, 2023. "Co-movement between dirty and clean energy: A time-frequency perspective," Energy Economics, Elsevier, vol. 119(C).
    13. Chen, Jinyu & Wang, Yilin & Ren, Xiaohang, 2022. "Asymmetric effects of non-ferrous metal price shocks on clean energy stocks: Evidence from a quantile-on-quantile method," Resources Policy, Elsevier, vol. 78(C).
    14. Wei, Yu & Zhang, Jiahao & Bai, Lan & Wang, Yizhi, 2023. "Connectedness among El Niño-Southern Oscillation, carbon emission allowance, crude oil and renewable energy stock markets: Time- and frequency-domain evidence based on TVP-VAR model," Renewable Energy, Elsevier, vol. 202(C), pages 289-309.
    15. Li, Zheng Zheng & Su, Chi-Wei & Moldovan, Nicoleta-Claudia & Umar, Muhammad, 2023. "Energy consumption within policy uncertainty: Considering the climate and economic factors," Renewable Energy, Elsevier, vol. 208(C), pages 567-576.

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