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Do Investors in Clean Energy ETFs Herd? The Role of Climate Risks

Author

Listed:
  • Vassilios Babalos

    (Department of Accounting and Finance, University of Peloponnese, Kalamata, Greece)

  • Xolani Sibande

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Elie Bouri

    (Adnan Kassar School of Business, Lebanese American University, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

This study offers new insights into the herding behaviour in US clean energy Exchange-traded funds (ETFs) over the period from May 1, 2016 to June 19, 2024. The baseline model shows significant herding. An extended mode indicates that herding is present in both down and up markets, with a stronger effect in the down market, suggesting an asymmetry. Herding is also found to be time-varying. Further analysis shows that the transition climate risk, particularly its high level, reduces the probability of herding in clean energy ETFs, whereas physical climate risk does not exert any significant impact on the probability of herding. Thus, large levels of transition climate risk seem to encourage market efficiency in clean energy ETFs and climate-hedging behavior by investors.

Suggested Citation

  • Vassilios Babalos & Xolani Sibande & Elie Bouri & Rangan Gupta, 2025. "Do Investors in Clean Energy ETFs Herd? The Role of Climate Risks," Working Papers 202512, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202512
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    File URL: http://www.up.ac.za/media/shared/61/WP/wp_2025_12.zp263381.pdf
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    More about this item

    Keywords

    Herding Behaviour; Climate Change; Clean Energy;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment

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