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Oil Prices and the Renewable Energy Sector

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Abstract

Energy security, climate change, and growing energy demand issues are moving up on the global political agenda, and contribute to the rapid growth of the renewable energy sector. In this paper we investigate the effects of oil price shocks, and also of uncertainty about oil prices, on the stock returns of clean energy and technology companies. In doing so, we use monthly data that span the period from May 1983 to December 2016, and a bivariate structural VAR model that is modified to accommodate GARCH-in-mean errors, and it is used to generate impulse response functions. Moreover, we examine the asymmetry of stock responses to oil price shocks and compare them accounting for oil price uncertainty, while effects of oil price shocks of different magnitude are also investigated. Our evidence indicates that oil price uncertainty has no statistically significant effect on stock returns, and that the relationship between oil prices and stock returns is symmetric. Our results are robust to alternative model specifications and stock prices of clean energy companies.

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  • Kyritsis, Evangelos & Serletis, Apostolos, 2017. "Oil Prices and the Renewable Energy Sector," Discussion Papers 2017/15, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2017_015
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    File URL: http://hdl.handle.net/11250/2466261
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    1. Caporale, Guglielmo Maria & Menla Ali, Faek & Spagnolo, Nicola, 2015. "Oil price uncertainty and sectoral stock returns in China: A time-varying approach," China Economic Review, Elsevier, vol. 34(C), pages 311-321.
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    More about this item

    Keywords

    Renewable energy; Transition; Oil prices; Uncertainty; GARCH-in-Mean model; Asymmetric responses;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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