Is it attractive to invest in alternative energy? Evidence from a five-factor Fama-French model for regional DJSI and renewable stock indexes

García-Amate, Antonio; Orellana, Alicia Ramírez; Ramirez, Alfonso A. Rojo

doi:10.1108/sampj-09-2020-0317

Cited by 3 publications

(1 citation statement)

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“…As suspected by this study, confirmed by the evidence documented in the study, the simultaneous and independent occurrence of the two opposing reasons for pursuing energy security are causing turbulences in the NASDAQ clean energy financial market. This indicates that investors, fund managers and clean energy companies’ financial managers are faced with risks and uncertainties in clean energy financial markets (Garcia-Amate, 2022). More specifically, the findings of this study confirm that varied and conflicting energy security policies distort energy generation and consumption patterns thereby creating high turbulences in clean energy financial markets.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

External energy security elements and the riskiness of clean energy stocks: a volatility analysis

Hassan¹

2023

SAMPJ

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Purpose Clean energy stocks are exhibiting signs of increasing volatility reflecting the varied and conflicting strategies employed by nations to pursue energy security objectives. In this regard, this paper aims to examine the response of NASDAQ clean energy stock returns volatility to the influences of external energy security elements including oil price, natural gas price, coal price, carbon price and green information technology stock price. Design/methodology/approach The paper uses symmetric and asymmetric generalised autoregressive conditional heteroskedasticity models (GARCH and TGARCH, respectively), which incorporate external energy security elements as exogenous variables, to estimate volatility models for clean energy stock returns. Findings Although, prices of oil, coal and natural gas are negatively associated with NASDAQ clean energy returns volatility, only the effect of natural gas price is significant. While carbon price affects NASDAQ clean energy returns volatility positively, green information technology price affects the volatility negatively. These results are robust to exponential GARCH and lead-and-lag robust ordinary least-squares as alternative estimation methods. Research limitations/implications The study lumps the effects of all other external and internal factors, including internal energy security elements, in the autoregressive conditional heteroscedasticity (ARCH) term to predict NASDAQ clean energy returns conditional variance. GARCH method does not disentangle individual roles of the factors captured in the ARCH term in predicting volatility. Practical implications Results documented imply that natural gas appears a closer substitute for renewable energy sources than crude oil and coal, such that its price rise is perceived as good news in the NASDAQ clean energy financial market, while a fall is considered bad news. Furthermore, both an increase in carbon price and a decrease in green information technology stock performance are perceived as negative shocks. Social implications In assessing risks associated with clean energy stocks, investors and fund managers should carefully consider the effects of external energy security elements. Originality/value To the best of the author’s knowledge, the paper is the first to identify external energy security elements and examine their effects on clean energy stock volatility.

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Section: Discussion Of Resultsmentioning

confidence: 99%