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Nonlinear impact of climate risks on renewable energy stocks in China: A moderating effects study

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  • Rong, Xueyun
  • Chen, Haixin
  • Liu, Shuhao

Abstract

This paper assesses the physical climate risks renewable energy stocks face in China. Employing a functional coefficient model, the study investigates the nonlinear impacts and moderating effects of climate risk on the returns and volatility of these stocks. The key findings are as follows: (1) The physical climate risk levels for renewable energy stocks exhibit a normal distribution pattern. (2) Physical climate risk has a U-shaped nonlinear effect on both stock returns and volatility, where higher levels of risk enhance returns but also increase volatility. (3) Climate transition risk has a U-shaped influence on stock returns and an inverted U-shaped influence on stock volatility. Specifically, high climate transition risk not only elevates returns but also stabilizes the renewable energy stock market. Moreover, heightened climate transition risk amplifies the negative effects of oil price volatility on stock returns and increases overall stock volatility.

Suggested Citation

  • Rong, Xueyun & Chen, Haixin & Liu, Shuhao, 2024. "Nonlinear impact of climate risks on renewable energy stocks in China: A moderating effects study," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005453
    DOI: 10.1016/j.irfa.2024.103613
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