IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v136y2024ics0140988324004481.html
   My bibliography  Save this article

Alternative monetary policies and renewable energy stock returns

Author

Listed:
  • Gordo, Natali
  • Hunt, Alistair
  • Morley, Bruce

Abstract

The aim of this study is to determine how monetary policy interacts with the financial sector specialising in renewable energy, especially since the implementation of Quantitative Easing (QE). Using EU data and the VAR approach incorporating the interest rate, representing monetary policy, an index of renewable energy stock prices, oil prices, technology and the VIX, this paper applies Granger causality, generalised impulse response functions and historical variance decompositions to explain this interaction. To account for the changes in monetary policy such as QE, structural break tests have been used to determine their effects on the variables, as the breaks correspond to the main QE events, the data has been divided into subsamples to reflect the possible differing effects of QE. The results suggest that monetary policy has only a limited effect overall on renewable energy stocks, as the long recent period of alternative monetary policies has been found not to influence renewable energy stock prices. More time-disaggregated analysis undertaken by incorporating structural breaks identifies a significant influence during some time periods depending on the type of monetary policy being conducted.

Suggested Citation

  • Gordo, Natali & Hunt, Alistair & Morley, Bruce, 2024. "Alternative monetary policies and renewable energy stock returns," Energy Economics, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:eneeco:v:136:y:2024:i:c:s0140988324004481
    DOI: 10.1016/j.eneco.2024.107740
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988324004481
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2024.107740?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jeff Fleming & Barbara Ostdiek & Robert E. Whaley, 1995. "Predicting stock market volatility: A new measure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 15(3), pages 265-302, May.
    2. Wu, JunFeng & Zhang, Chao & Chen, Yun, 2022. "Analysis of risk correlations among stock markets during the COVID-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 83(C).
    3. Dafermos, Yannis & Nikolaidi, Maria & Galanis, Giorgos, 2018. "Climate Change, Financial Stability and Monetary Policy," Ecological Economics, Elsevier, vol. 152(C), pages 219-234.
    4. Cologni, Alessandro & Manera, Matteo, 2008. "Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 countries," Energy Economics, Elsevier, vol. 30(3), pages 856-888, May.
    5. Fahmy, Hany, 2022. "The rise in investors’ awareness of climate risks after the Paris Agreement and the clean energy-oil-technology prices nexus," Energy Economics, Elsevier, vol. 106(C).
    6. Reboredo, Juan C., 2015. "Is there dependence and systemic risk between oil and renewable energy stock prices?," Energy Economics, Elsevier, vol. 48(C), pages 32-45.
    7. Managi, Shunsuke & Okimoto, Tatsuyoshi, 2013. "Does the price of oil interact with clean energy prices in the stock market?," Japan and the World Economy, Elsevier, vol. 27(C), pages 1-9.
    8. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    10. Bouoiyour, Jamal & Gauthier, Marie & Bouri, Elie, 2023. "Which is leading: Renewable or brown energy assets?," Energy Economics, Elsevier, vol. 117(C).
    11. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    12. Hofman, Daan M. & Huisman, Ronald, 2012. "Did the financial crisis lead to changes in private equity investor preferences regarding renewable energy and climate policies?," Energy Policy, Elsevier, vol. 47(C), pages 111-116.
    13. Henriques, Irene & Sadorsky, Perry, 2008. "Oil prices and the stock prices of alternative energy companies," Energy Economics, Elsevier, vol. 30(3), pages 998-1010, May.
    14. Altavilla, Carlo & Burlon, Lorenzo & Giannetti, Mariassunta & Holton, Sarah, 2022. "Is there a zero lower bound? The effects of negative policy rates on banks and firms," Journal of Financial Economics, Elsevier, vol. 144(3), pages 885-907.
    15. Sarwar, Ghulam, 2014. "U.S. stock market uncertainty and cross-market European stock returns," Journal of Multinational Financial Management, Elsevier, vol. 28(C), pages 1-14.
    16. Inchauspe, Julian & Ripple, Ronald D. & Trück, Stefan, 2015. "The dynamics of returns on renewable energy companies: A state-space approach," Energy Economics, Elsevier, vol. 48(C), pages 325-335.
    17. Lee A. Smales, 2016. "Time-varying relationship of news sentiment, implied volatility and stock returns," Applied Economics, Taylor & Francis Journals, vol. 48(51), pages 4942-4960, November.
    18. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2011. "The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 3-43, March.
    19. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    20. Francisco Jareño & Román Ferrer & Stanislava Miroslavova, 2016. "US stock market sensitivity to interest and inflation rates: a quantile regression approach," Applied Economics, Taylor & Francis Journals, vol. 48(26), pages 2469-2481, June.
    21. Sadorsky, Perry, 2001. "Risk factors in stock returns of Canadian oil and gas companies," Energy Economics, Elsevier, vol. 23(1), pages 17-28, January.
    22. Donggyu Lee & Jungho Baek, 2018. "Stock Prices of Renewable Energy Firms: Are There Asymmetric Responses to Oil Price Changes?," Economies, MDPI, vol. 6(4), pages 1-8, November.
    23. Bondia, Ripsy & Ghosh, Sajal & Kanjilal, Kakali, 2016. "International crude oil prices and the stock prices of clean energy and technology companies: Evidence from non-linear cointegration tests with unknown structural breaks," Energy, Elsevier, vol. 101(C), pages 558-565.
    24. Tiantian Liu & Shigeyuki Hamori, 2020. "Spillovers to Renewable Energy Stocks in the US and Europe: Are They Different?," Energies, MDPI, vol. 13(12), pages 1-28, June.
    25. Ferrer, Román & Bolós, Vicente J. & Benítez, Rafael, 2016. "Interest rate changes and stock returns: A European multi-country study with wavelets," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 1-12.
    26. Jiang, George J. & Konstantinidi, Eirini & Skiadopoulos, George, 2012. "Volatility spillovers and the effect of news announcements," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2260-2273.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferrer, Román & Shahzad, Syed Jawad Hussain & López, Raquel & Jareño, Francisco, 2018. "Time and frequency dynamics of connectedness between renewable energy stocks and crude oil prices," Energy Economics, Elsevier, vol. 76(C), pages 1-20.
    2. Çelik, İsmail & Sak, Ahmet Furkan & Höl, Arife Özdemir & Vergili, Gizem, 2022. "The dynamic connectedness and hedging opportunities of implied and realized volatility: Evidence from clean energy ETFs," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    3. Bouoiyour, Jamal & Gauthier, Marie & Bouri, Elie, 2023. "Which is leading: Renewable or brown energy assets?," Energy Economics, Elsevier, vol. 117(C).
    4. Uddin, Gazi Salah & Rahman, Md Lutfur & Hedström, Axel & Ahmed, Ali, 2019. "Cross-quantilogram-based correlation and dependence between renewable energy stock and other asset classes," Energy Economics, Elsevier, vol. 80(C), pages 743-759.
    5. Zhang, Guofu & Du, Ziping, 2017. "Co-movements among the stock prices of new energy, high-technology and fossil fuel companies in China," Energy, Elsevier, vol. 135(C), pages 249-256.
    6. Karkowska, Renata & Urjasz, Szczepan, 2023. "How does the Russian-Ukrainian war change connectedness and hedging opportunities? Comparison between dirty and clean energy markets versus global stock indices," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    7. Matteo Foglia & Eliana Angelini, 2020. "Volatility Connectedness between Clean Energy Firms and Crude Oil in the COVID-19 Era," Sustainability, MDPI, vol. 12(23), pages 1-22, November.
    8. Rui Dias & Nuno Teixeira & Paulo Alexandre & Mariana Chambino, 2023. "Exploring the Connection between Clean and Dirty Energy: Implications for the Transition to a Carbon-Resilient Economy," Energies, MDPI, vol. 16(13), pages 1-21, June.
    9. Shah, Imran Hussain & Hiles, Charlie & Morley, Bruce, 2018. "How do oil prices, macroeconomic factors and policies affect the market for renewable energy?," Applied Energy, Elsevier, vol. 215(C), pages 87-97.
    10. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).
    11. Urom, Christian & Mzoughi, Hela & Ndubuisi, Gideon & Guesmi, Khaled, 2022. "Directional predictability and time-frequency spillovers among clean energy sectors and oil price uncertainty," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 326-341.
    12. Reboredo, Juan C. & Ugolini, Andrea, 2020. "Price connectedness between green bond and financial markets," Economic Modelling, Elsevier, vol. 88(C), pages 25-38.
    13. Kocaarslan, Baris & Soytas, Ugur, 2021. "Reserve currency and the volatility of clean energy stocks: The role of uncertainty," Energy Economics, Elsevier, vol. 104(C).
    14. Qu, Fang & Chen, Yufeng & Zheng, Biao, 2021. "Is new energy driven by crude oil, high-tech sector or low-carbon notion? New evidence from high-frequency data," Energy, Elsevier, vol. 230(C).
    15. Fernanda Fuentes & Rodrigo Herrera, 2020. "Dynamics of Connectedness in Clean Energy Stocks," Energies, MDPI, vol. 13(14), pages 1-19, July.
    16. Chen, Yufeng & Zheng, Biao & Qu, Fang, 2020. "Modeling the nexus of crude oil, new energy and rare earth in China: An asymmetric VAR-BEKK (DCC)-GARCH approach," Resources Policy, Elsevier, vol. 65(C).
    17. Hemrit, Wael & Benlagha, Noureddine, 2021. "Does renewable energy index respond to the pandemic uncertainty?," Renewable Energy, Elsevier, vol. 177(C), pages 336-347.
    18. Su, Xianfang & Zhao, Yachao, 2023. "What has the strongest connectedness with clean energy? Technology, substitutes, or raw materials," Energy Economics, Elsevier, vol. 128(C).
    19. Kocaarslan, Baris & Soytas, Ugur, 2019. "Dynamic correlations between oil prices and the stock prices of clean energy and technology firms: The role of reserve currency (US dollar)," Energy Economics, Elsevier, vol. 84(C).
    20. Shah, Adil Ahmad & Sahay, Arvind, 2024. "Is gold a preferable diversifier of cleaner equity risk across diverse scenarios? Evidence from multidimensional connectedness and spillover measures," Energy, Elsevier, vol. 305(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:136:y:2024:i:c:s0140988324004481. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.