The Dynamics of Returns on Renewable Energy Companies: A State-Space Approach

22 Pages Posted: 27 Dec 2016

See all articles by Julian Inchauspe

Julian Inchauspe

School of Economics and Finance

Ronald D. Ripple

Curtin University; Curtin University - Centre for Research in Applied Economics

Stefan Trück

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR); Macquarie University, Macquarie Business School

Date Written: November 15, 2014

Abstract

The renewable energy sector has accomplished remarkable growth rates over the last decade. This paper examines the dynamics of excess returns for the WilderHill New Energy Global Innovation index, which lists firms in the renewable energy sector and is used as a global benchmark. We propose a multi-factor asset pricing model with time-varying coefficients to study the role of energy prices and stock market indices as explanatory factors. Our results suggest a strong influence of the MSCI World index and technology stocks throughout the sample period. The influence of changes in the oil price is significantly lower, although oil has become more influential from 2007 onwards. We also find evidence for underperformance of the renewable energy sector relative to the considered pricing factors after the financial crisis.

Keywords: Renewable Energy, Oil Price, State-Space Models, CAPM, WilderHill New Energy Index

JEL Classification: Q42, Q43, G12

Suggested Citation

Inchauspe, Julian and Ripple, Ronald D. and Trueck, Stefan, The Dynamics of Returns on Renewable Energy Companies: A State-Space Approach (November 15, 2014). Energy Economics, Vol. 48, 2015, Available at SSRN: https://ssrn.com/abstract=2889891

Julian Inchauspe

School of Economics and Finance ( email )

GPO Box U1987
Perth WA 6845
Australia

Ronald D. Ripple

Curtin University ( email )

GPO Box U1987
Perth, WA WA
Australia

Curtin University - Centre for Research in Applied Economics ( email )

GPO Box U1987
Perth, Western Australia 6845
Australia

Stefan Trueck (Contact Author)

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies ( email )

North Ryde
Sydney, New South Wales 2109
Australia
61298508483 (Phone)
61298508483 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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