Do the stock returns of clean energy corporations respond to oil price shocks and policy uncertainty?

Xiaohui Zhao

doi:10.1186/s40008-020-00229-x

Abstract

This paper investigates the effects of oil price shocks and policy uncertainty on the stock returns of clean energy companies. We use a structural vector autoregressive (VAR) model to separate demand and supply shocks in the global crude oil market from 2001 to 2018. We find that oil supply shocks and aggregated demand shocks have a positive effect on the returns of clean energy companies, while policy uncertainty shocks and oil-specific-demand shocks have a negative effect. The impacts of these shocks are shown to last relatively long. Moreover, the effects of oil shocks on the clean energy stock returns are amplified by adding policy uncertainty as an endogenously driven factor to the model. The impact of policy uncertainty is mainly transmitted through the uncertainty of inflation.

Highlights

With the global pressure caused by climate change and air pollution, traditional energy users are considering the possibility of using clean energy alternatives such as solar, wind, and hydropower
5 Conclusion Previous studies have demonstrated that the impacts of different oil shocks and policy uncertainty on the US aggregated stock returns and oil and gas sector returns are qualitatively and quantitatively different (Kang and Ratti 2013; Kang et al 2017)
In the context of a rapidly-developing renewable energy industry, we followed Kilian’s (2009) crude oil model to investigate the renewable energy stock market fluctuations associated with three different oil price shocks and policy uncertainty, endogenously

Summary

Introduction

With the global pressure caused by climate change and air pollution, traditional energy users are considering the possibility of using clean energy alternatives such as solar, wind, and hydropower. Using structural vector autoregressive (VAR) decomposition of the real price of oil as proposed by Kilian (2009), Kang et al (2017) investigated the effects of oil price shocks and economic policy uncertainty on the stock returns of oil and gas companies. They found that, on average, a demand-side

Methods

Results

Conclusion