Abstract
The outbreak of the COVID-19 pandemic has had significant negative impacts on financial markets, including energy stock markets. However, recently proposed and implemented green recovery plans may mean that clean energy firms demonstrate better performance than fossil fuel firms after the pandemic. As more voices call for the update of clean energy, theory on investor attention suggests investors will pay more attention to the potential to invest in clean energy stocks. Using a sample period of eight weeks before and during the pandemic, we find that the negative impact of the outbreak on both clean energy and fossil fuel firms is more significant for fossil fuel firms. Our results further show that during the pandemic there have been improved returns for clean energy firms as a consequence of investor attention, but not for fossil fuel firms. Our findings provide empirical evidence for the advantages of green recovery schemes in influencing financial markets, especially for clean energy stocks. These results suggest there are benefits for further promotion and implementation of green recovery stimulus measures post-pandemic.
Highlights
The impact of the COVID-19 pandemic around the world has been dramatic
This paper has investigated the impact of investor attention to COVID-19 on the financial performance of clean energy firms versus fossil fuel firms
We find that the COVID-19 outbreak negatively impacted both clean energy and fossil fuel firms, but that the negative impact was more significant for fossil fuel firms
Summary
The impact of the COVID-19 pandemic around the world has been dramatic. According to the latest statistics from the World Health Organisation (WHO), there have been more than 25 million COVID-19 cases globally, and the death toll continues to rise (WHO, 2020). A comparison between the financial performance of clean energy and fossil fuel firms is timely and likely to have important practical implications. Our results show that clean energy firms have outperformed fossil fuel firms during the pandemic in our study period. Investor attention to the disruptive effects of COVID-19 has had a significant and positive effect on clean energy stocks’ returns, while a similar effect was not evident for fossil fuel firms. Our findings suggest superior financial performance for clean energy firms during and after the global crisis and highlight the potential for a green recovery post-pandemic. The sixteen-week trading information enables ex-ante and ex-post comparisons for the impact of the pandemic on clean energy firms versus fossil fuel firms. Consistent with existing measurements of attention variables (Han et al, 2017; Qadan and Nama, 2018; Li et al, 2019), we aggregated the daily BSI of nine COVID-19 related keywords and used the logarithm of the aggregated score to construct the attention variable (attention)
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