Prosocial Preference, Social Image Motivation, and Green Asset Bubble

Draganac, Dragana; Lu, Kelin

doi:10.2139/ssrn.4116438

Cited by 1 publication

(1 citation statement)

References 56 publications

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“…Results confirm my previous conjecture and suggest that long lags (approximately eleven months) are at work in the migration of the bubble from green energy stocks to the overall stock market. My results are in line with the experimental evidence presented in Draganac and Lu [8], who find that non-pecuniary factors influence financial markets, which can lead to stock price bubbles. They present a lab experiment in which subjects simultaneously trade two assets in the market.…”

Section: Bubble Migrationsupporting

confidence: 91%

The Green Stock Market Bubble

Lehnert

2022

Circ.Econ.Sust.

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One may contend that there are some clear similarities between the market for sustainable assets now and the situation of tech stocks right before the collapse of the dot-com bubble. In fact, before 2000, the risk of the new technology was primarily idiosyncratic because of the limited scale of production and the low likelihood of a widespread adoption. Subsequently, with an increasing probability of adoption, also, the old economy was affected by the new technology and, hence, the wealth of the representative agent. As a result, systematic risk increased, which depressed stock prices, because it pushed up the discount rates in the new and old economies. Similarly, given the high probability of a large-scale adoption of the new “green technology,” it is likely that there is not only a bubble forming in green energy stocks, but the boom is affecting the stock market as a whole. I apply a recently developed recursive testing procedure and dating algorithm that is useful in detecting multiple bubble events. Using S&P 500 stock market data, price-dividend ratios, I identify the well-known historical speculative bubbles and find an explosive movement in today’s market starting in June 2021, which can be associated with the new “green technology.” I find that an explosive movement in green stocks started roughly a year before it was migrating to the whole stock market. I argue that this is a good bubble because it will enable businesses to invest cheaply in green energy, hastening the transition away from fossil fuels and assisting in the fight against climate change.

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Section: Bubble Migrationsupporting

confidence: 91%

The Green Stock Market Bubble

Lehnert

2022

Circ.Econ.Sust.

View full text Add to dashboard Cite

show abstract

Prosocial Preference, Social Image Motivation, and Green Asset Bubble

Cited by 1 publication

References 56 publications

The Green Stock Market Bubble

The Green Stock Market Bubble

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