Oil Prices and Clean Energy Stock Prices – A Replication and Extension

Abstract

Sadorsky (2012) analyzes correlations and volatility spillovers between oil prices and stock price indices of clean energy and technology companies. In this paper, we replicate the original analysis of Sadorsky (2012), extend the sample period and present new findings. The extended sample analysis shows that the correlation estimates reported in the original paper have not changed since 2010 despite increased efforts to tackle climate change. A re-analysis demonstrates that return and volatility spillovers are economically negligible consistent with efficient markets and economic theory but in stark contrast with the title and focus of the original paper. We further show that a two-asset portfolio analysis yields results with limited practical relevance. Our study highlights the importance of a theoretical grounding of empirical research.