( 2017) showed that policy uncertainty significantly affects the stock returns of oil and gas companies. 2013 Kang and Ratti 2013 Liu and Zhang 2015). For example, some oil users who cannot afford high oil prices may increase the demand of renewable energy and decrease the demand of oil.Ī large number of studies investigated the impact of the last factor, policy uncertainty, on stock market returns (Antonakakis et al. Since renewable energy is substitutable with oil, these three factors are considered to affect renewable energy stock returns as well. ( 2017) as the oil related factors affecting the stock returns of oil and gas companies. We employ a structural VAR model using monthly data from January 2001 to December 2018.Īmong four factors affecting the stock returns of renewable energy companies, the first three (oil supply shocks, aggregated demand shocks, oil-specific demand shocks), are considered by Kilian ( 2009) to be the main factors affecting oil prices. Using these two studies as a starting point, this paper extends the literature by examining the impact of four factors-oil supply shocks, aggregated demand shocks, oil-specific demand shocks, and policy uncertainty shocks-on the stock returns of clean energy companies. They found that, on average, a demand-side oil shock has a positive effect on the returns of oil and gas companies, whereas shocks to policy uncertainty have a negative effect on stock returns. ( 2017) investigated the effects of oil price shocks and economic policy uncertainty on the stock returns of oil and gas companies. Using structural vector autoregressive (VAR) decomposition of the real price of oil as proposed by Kilian ( 2009), Kang et al. The author attributes fluctuations in the real price of oil to three structural shocks in the oil market. Kilian ( 2009) argues that, historically, oil price shocks have mainly been driven by a combination of global aggregate demand shocks and precautionary demand shocks, rather than by oil supply shocks. Therefore, to shed light on the link between oil price and renewable energy stock price, a more detailed analysis is necessary.
Although changes in the price of oil are often considered a crucial factor for the development of clean energy, there is no consensus among economists about the relation between the stock prices of clean energy and the prices of oil. The uncertainties in the oil market, such as unpredicted increases in oil prices, stress the need for energy substitution and may accelerate the energy transition. With the global pressure caused by climate change and air pollution, traditional energy users are considering the possibility of using clean energy alternatives such as solar, wind, and hydropower.
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