Oil Prices and the Renewable Energy Sector

41 Pages Posted: 16 Nov 2017

See all articles by Evangelos Kyritsis

Evangelos Kyritsis

VATT Institute for Economic Research; Norwegian School of Economics (NHH) - ENE Research Centre

Apostolos Serletis

University of Calgary - Department of Economics

Date Written: November 4, 2017

Abstract

Energy security, climate change, and growing energy demand issues are moving up on the global political agenda, and contribute to the rapid growth of the renewable energy sector. In this paper we investigate the effects of oil price shocks, and also of uncertainty about oil prices, on the stock returns of clean energy and technology companies. In doing so, we use monthly data that span the period from May 1983 to December 2016, and a bivariate structural VAR model that is modified to accommodate GARCH-in-mean errors, and it is used to generate impulse response functions. Moreover, we examine the asymmetry of stock responses to oil price shocks and compare them accounting for oil price uncertainty, while effects of oil price shocks of different magnitude are also investigated. Our evidence indicates that oil price uncertainty has no statistically significant effect on stock returns, and that the relationship between oil prices and stock returns is symmetric. Our results are robust to alternative model specifications and stock prices of clean energy companies.

Keywords: Renewable Energy, Transition, Oil Prices, Uncertainty, GARCH-in-Mean Model, Asymmetric Responses

JEL Classification: C32, G15, Q42

Suggested Citation

Kyritsis, Evangelos and Serletis, Apostolos, Oil Prices and the Renewable Energy Sector (November 4, 2017). NHH Dept. of Business and Management Science Discussion Paper No. 2017/15. Available at SSRN: https://ssrn.com/abstract=3070998 or http://dx.doi.org/10.2139/ssrn.3070998

Evangelos Kyritsis (Contact Author)

VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Norwegian School of Economics (NHH) - ENE Research Centre ( email )

Helleveien 30
Bergen, NO-5045
Norway

Apostolos Serletis

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

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