The dynamic dependence of natural gas and renewable energy stock markets

Abstract

We measure the dynamics dependence structure between the European renewable energy stock (ERIX) market, natural gas, and other clean energy markets from 2008 to 2021 by adopting static and time-varying copula approaches. Empirical results show strong and positive dependence between ERIX and S&P global clean energy stock markets symmetric tail dependence, which indicates S&P clean energy assets provide limited hedging condition on the ERIX market and extreme upward and downward clean prices have a similar impact on the ERIX market. Furthermore, our evidence on the co-movement mechanisms between European renewable energy and clean energy markets is helpful for policymakers and investors. Governments need to adopt fiscal policy tools for clean energy firms when renewable energy prices rise (fall) together. Investors can assess and control potential risk contagion between European renewable energy stock markets and other clean energy markets via information about co-movement mechanisms.