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The Impact of Market Uncertainty on the Systematic Risk of Clean Energy Stocks

In: Applications in Energy Finance

Author

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  • Perry Sadorsky

    (York University)

Abstract

As investing in clean energy equities grows, a better understanding of the impact of market uncertainty on clean energy systematic risk is required because the systematic risk is used to estimate the cost of capital and to formulate investment strategies. The focus of this paper is to use multivariate GARCH models (ADCC, GO-GARCH) to calculate time-varying conditional clean energy equity betas and to study the impact that market uncertainty (stock market, oil market, technology stock market), measured using implied volatility, has on clean energy equity betas. The clean energy equity beta values show considerable time variation. Evidence is presented to show that implied volatility does have a significant impact on clean energy equity beta. This result is consistent with a mean reversion response of beta to increases in market volatility and is robust to the choice of GARCH model used to estimate beta.

Suggested Citation

  • Perry Sadorsky, 2022. "The Impact of Market Uncertainty on the Systematic Risk of Clean Energy Stocks," Springer Books, in: Christos Floros & Ioannis Chatziantoniou (ed.), Applications in Energy Finance, chapter 0, pages 171-193, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-92957-2_7
    DOI: 10.1007/978-3-030-92957-2_7
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    Cited by:

    1. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).
    2. Shivam Swarup & Gyaneshwar Singh Kushwaha, 2022. "Effects of Temperature Rise on Clean Energy-Based Capital Market Investments: Neural Network-Based Granger Causality Analysis," Sustainability, MDPI, vol. 14(18), pages 1-12, September.

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