Uncertainty and Stock Returns in Energy Markets: A Quantile Regression Approach

27 Pages Posted: 9 Apr 2021

See all articles by Samir Cedic

Samir Cedic

Linkoping University

Alwan Mahmoud

Linkoping University

Matteo Manera

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS); Fondazione Eni Enrico Mattei (FEEM), Milan, Italy

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division

Date Written: April 8, 2021

Abstract

The aim of this paper is to analyze the relationship between different types of uncertainty and stock returns of the renewable energy and the oil & gas sectors. We use the quantile regression approach developed by Koenker and d’Orey (1987; 1994) to assess which uncertainties are the potential drivers of stock returns under different market conditions. We find that the bioenergy and the oil & gas sectors are most sensitive to uncertainties. Both sectors are affected by financial, euro currency, geopolitical and economic policy uncertainties. Our results have several policy implications. Climate policy makers can prioritize policies that support bioenergy in order to reduce the potentially negative effects of uncertainties on bioenergy investment. Investors aiming to
diversify their portfolio should be aware that many uncertainties are common drivers of bioenergy and oil & gas returns, the connectedness between assets of these energy types could therefore increase when uncertainty increases.

Keywords: Uncertainty, Macroeconomic Conditions, Renewable Energy, Stock Returns, Quantile Regression

JEL Classification: C1, G15, Q2, Q3, Q43

Suggested Citation

Cedic, Samir and Mahmoud, Alwan and Manera, Matteo and Uddin, Gazi Salah, Uncertainty and Stock Returns in Energy Markets: A Quantile Regression Approach (April 8, 2021). FEEM Working Paper No. 11.2021, Available at SSRN: https://ssrn.com/abstract=3822177 or http://dx.doi.org/10.2139/ssrn.3822177

Samir Cedic

Linkoping University ( email )

Överstegatan 30
Linkoping, 581 83
Sweden

Alwan Mahmoud

Linkoping University ( email )

Överstegatan 30
Linkoping, 581 83
Sweden

Matteo Manera (Contact Author)

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS) ( email )

Via Bicocca degli Arcimboldi, 8
Milan, 20126
Italy
+39 02 6448 5819 (Phone)
+39 02 6448 5878 (Fax)

HOME PAGE: http://www.matteomanera.it

Fondazione Eni Enrico Mattei (FEEM), Milan, Italy ( email )

Corso Magenta, 63
Milan, 20123
Italy
+39 02 520 36944 (Phone)

HOME PAGE: http://www.feem.it

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division ( email )

Linköping, 581 83
Sweden

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