Abstract
In order to address a series of issues, including energy security, global warming, and environmental protection, China has ranked first in global renewable investment for the seventh consecutive year. However, developing a renewable energy industry requires a significant capital investment. Also, the international oil price fluctuations have an important impact on the stock prices of renewable energy firms. Thus, in order to provide implications for market investment as well as policy recommendations, this paper studied the spillover effect of international oil prices on the stock prices of China’s renewable energy listed companies. We used a Vector Autoregressive (VAR) model with innovations using a Factor-GARCH (Generalized Autoregressive Conditional Heteroskedasticity) process to evaluate the impact of market co-movements and time-varying volatility and correlation between the international oil price and China’s renewable energy market. The results show that the international oil price has a significant price spillover effect on the stock prices of China’s renewable energy listed companies. Moreover, the fluctuations of international oil prices have an influence on the stock price variations of Chinese renewable energy listed companies.
Highlights
In recent years, a series of energy security, global warming, and environmental protection issues brought about by burning fossil fuels have prompted governments around the world to shift to developing renewable energy
The results show that the international oil price has a significant price spillover effect on the stock prices of China’s renewable energy listed companies
This paper studied the Vector Autoregressive (VAR) model with the innovation using Factor-GARCH process in order to investigate the time-varying market volatility and correlation between the international oil market and China’s renewable energy market during the period of 2014 to 2018
Summary
A series of energy security, global warming, and environmental protection issues brought about by burning fossil fuels have prompted governments around the world to shift to developing renewable energy. Global total investment in renewable power and fuels reached. 288.9 billion USD in 2018, which was seven times higher than the amount in 2004 [1]. In 2018, the total investment in renewable power was almost three times higher than the amount of investment in newly installed gas and coal generators. China has ranked first in global renewable investment for the seventh consecutive year, with 91.2 billion USD in 2018 (see Figure 1) [1,2]. In terms of the world’s energy development trend, renewable energy has a progressively essential role to play [3]
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