Tail Risk and Extreme Events: Connections between Oil and Clean Energy

Abstract

Do tail events in the oil market trigger extreme responses by the clean-energy financial market (and vice versa)? This paper investigates the relationship between oil price and clean-energy stock with a novel methodology, namely extreme events study. The aim is to investigate an asymmetry effect between the response to good versus bad days. The results show how the two markets influence each other more negatively, i.e., extreme negative events significantly impact the other market. Furthermore, we document how the impact of the shock transmitted by oil prices to clean-energy stocks is less than the amount of shock transmitted oppositely. These findings have important implications for investor and renewable energy policies.

Co-movement between oil price,CO2emission,renewable energy and energy equities: Evidence from GCC countries

“…Most recent studies concentrated on the direct relationship between oil price changes and clean energy stock indices (Yu-Ling Hsiao et al, 2019;Dominioni et al, 2019;Fuentes and Herrera, 2020;Lv et al, 2021;Di Febo et al, 2021;Dawar et al, 2021;Ghabri et al, 2021). Most of these works found a significant oil price spillover effect on clean energy stock prices.…”

Long Memory in Clean Energy Exchange Traded Funds

“…Earlier literature on renewable energy company stock markets has mainly focused on the correlations between crude oil prices and these stock markets (e.g., Henriques and Sadorsky, 2008;Kumar et al, 2012;Sadorsky, 2012;Managi and Okimoto, 2013;Reboredo, 2015;Bondia et al, 2016;Ahmad, 2017;Dutta, 2017;Reboredo et al, 2017b;Ferrer et al, 2018;Maghyereh et al, 2019;Nasreen et al, 2020;Zhang et al, 2020;Di Febo et al, 2021). In addition to these studies, Dawar et al (2021) investigated the relationship between renewable energy stock prices and crude oil using a quantile-based regression approach under diff erent market conditions.…”