From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks

34 Pages Posted: 16 Mar 2012 Last revised: 12 Nov 2014

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Philipp Kaufmann

University of Muenster

Patrick M. Stephan

University of Münster

Date Written: March 14, 2012

Abstract

Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart four-factor alphas. The radical shift in Germany’s energy policy following the 2011 Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices.

Keywords: Renewable Energy Stocks, Performance Measurement, Speculative Bubbles, Sup ADF Test, Markov Regime-Switching ADF Test

JEL Classification: G10, G11, G12, Q42

Suggested Citation

Bohl, Martin T. and Kaufmann, Philipp and Stephan, Patrick M., From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks (March 14, 2012). Energy Economics, Vol. 37, 2013. Available at SSRN: https://ssrn.com/abstract=2022314 or http://dx.doi.org/10.2139/ssrn.2022314

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

Philipp Kaufmann (Contact Author)

University of Muenster ( email )

Am Stadtgraben 9
Muenster, D-48143
Germany
+49 (0)251 - 83 22 846 (Fax)

Patrick M. Stephan

University of Münster ( email )

Universitätsstr. 14-16
48143 Muenster, NRW 48143
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de

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