IDEAS home Printed from https://ideas.repec.org/p/cqe/wpaper/2412.html
   My bibliography  Save this paper

From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks

Author

Listed:
  • Martin Bohl
  • Philipp Kaufmann
  • Patrick Stephan

Abstract

Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart (1997) four-factor alphas. The radical shift in Germany's energy policy following the Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices.

Suggested Citation

  • Martin Bohl & Philipp Kaufmann & Patrick Stephan, 2012. "From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks," CQE Working Papers 2412, Center for Quantitative Economics (CQE), University of Muenster.
  • Handle: RePEc:cqe:wpaper:2412
    as

    Download full text from publisher

    File URL: https://www.wiwi.uni-muenster.de/cqe/sites/cqe/files/CQE_Paper/CQE_WP_24_2012.pdf
    File Function: Version of June, 2012
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
    2. Funke, Michael & Hall, Stephen & Sola, Martin, 1994. "Rational bubbles during Poland's hyperinflation: Implications and empirical evidence," European Economic Review, Elsevier, vol. 38(6), pages 1257-1276, June.
    3. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, February.
    4. Laurens Swinkels & Pieter Van Der Sluis, 2006. "Return-based style analysis with time-varying exposures," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 529-552.
    5. Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, vol. 2(3), pages 455-491, November.
    6. Nestle, Uwe, 2012. "Does the use of nuclear power lead to lower electricity prices? An analysis of the debate in Germany with an international perspective," Energy Policy, Elsevier, vol. 41(C), pages 152-160.
    7. Klessmann, Corinna & Held, Anne & Rathmann, Max & Ragwitz, Mario, 2011. "Status and perspectives of renewable energy policy and deployment in the European Union—What is needed to reach the 2020 targets?," Energy Policy, Elsevier, vol. 39(12), pages 7637-7657.
    8. 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.
    9. Andr� Betzer & Markus Doumet & Ulf Rinne, 2013. "How policy changes affect shareholder wealth: the case of the Fukushima Dai-ichi nuclear disaster," Applied Economics Letters, Taylor & Francis Journals, vol. 20(8), pages 799-803, May.
    10. Bauer, Rob & Cosemans, Mathijs & Eichholtz, Piet, 2009. "Option trading and individual investor performance," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 731-746, April.
    11. Hall, Stephen G & Psaradakis, Zacharias & Sola, Martin, 1999. "Detecting Periodically Collapsing Bubbles: A Markov-Switching Unit Root Test," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(2), pages 143-154, March-Apr.
    12. Michael M. Bechtel & Roland Füss, 2010. "Capitalizing on Partisan Politics? The Political Economy of Sector‐Specific Redistribution in Germany," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2‐3), pages 203-235, March.
    13. Sadorsky, Perry, 2012. "Correlations and volatility spillovers between oil prices and the stock prices of clean energy and technology companies," Energy Economics, Elsevier, vol. 34(1), pages 248-255.
    14. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    15. Eskeland, Gunnar S. & Rive, Nathan A. & Mideksa, Torben K., 2012. "Europe’s climate goals and the electricity sector," Energy Policy, Elsevier, vol. 41(C), pages 200-211.
    16. Kumar, Surender & Managi, Shunsuke & Matsuda, Akimi, 2012. "Stock prices of clean energy firms, oil and carbon markets: A vector autoregressive analysis," Energy Economics, Elsevier, vol. 34(1), pages 215-226.
    17. Peter S. Schmidt & Andreas Schrimpf & Urs von Arx & Alexander F. Wagner & Andreas Ziegler, 2011. "On the Construction of Common Size, Value and Momentum Factors in International Stock Markets: A Guide with Applications," CER-ETH Economics working paper series 11/141, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    18. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    19. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    20. Harry Mamaysky & Matthew Spiegel & Hong Zhang, 2008. "Estimating the Dynamics of Mutual Fund Alphas and Betas," The Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 233-264, January.
    21. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    22. Leggett, L. Mark W. & Ball, David A., 2012. "The implication for climate change and peak fossil fuel of the continuation of the current trend in wind and solar energy production," Energy Policy, Elsevier, vol. 41(C), pages 610-617.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Momete Daniela Cristina & Prisecaru Tudor, 2014. "The Importance Of Energy Solutions For A Safe And Rational Development," Balkan Region Conference on Engineering and Business Education, Sciendo, vol. 1(1), pages 379-384, August.

    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. Bohl, Martin T. & Kaufmann, Philipp & Stephan, Patrick M., 2013. "From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks," Energy Economics, Elsevier, vol. 37(C), pages 40-51.
    2. Bohl, Martin T. & Kaufmann, Philipp & Siklos, Pierre L., 2015. "What drove the mid-2000s explosiveness in alternative energy stock prices? Evidence from U.S., European and global indices," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 194-206.
    3. Peter C. B. Phillips & Shuping Shi & Jun Yu, 2015. "Testing For Multiple Bubbles: Historical Episodes Of Exuberance And Collapse In The S&P 500," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1043-1078, November.
    4. Zhao, Yanping & Chang, Hsu-Ling & Su, Chi-Wei & Nian, Rui, 2015. "Gold bubbles: When are they most likely to occur?," Japan and the World Economy, Elsevier, vol. 34, pages 17-23.
    5. Haykir, Ozkan & Yagli, Ibrahim & Aktekin Gok, Emine Dilara & Budak, Hilal, 2022. "Oil price explosivity and stock return: Do sector and firm size matter?," Resources Policy, Elsevier, vol. 78(C).
    6. Peter C. B. Phillips & Shu-Ping Shi & Jun Yu, 2011. "Testing for Multiple Bubbles," Working Papers CoFie-03-2011, Singapore Management University, Sim Kee Boon Institute for Financial Economics.
    7. 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.
    8. Bohl, Martin T. & Czaja, Marc-Gregor & Kaufmann, Philipp, 2016. "Momentum profits, market cycles, and rebounds: Evidence from Germany," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 139-159.
    9. Ortas, Eduardo & Moneva, José M., 2013. "The Clean Techs equity indexes at stake: Risk and return dynamics analysis," Energy, Elsevier, vol. 57(C), pages 259-269.
    10. Kocaarslan, Baris & Soytas, Ugur, 2021. "Reserve currency and the volatility of clean energy stocks: The role of uncertainty," Energy Economics, Elsevier, vol. 104(C).
    11. Sebastian Lobe & Christian Walkshäusl, 2016. "Vice versus virtue investing around the world," Review of Managerial Science, Springer, vol. 10(2), pages 303-344, March.
    12. Lucia BALDI & Massimo PERI & Daniela VANDONE, 2013. "Clean Energy Industries and Rare Earth Materials: Economic and Financial Issues," Departmental Working Papers 2013-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    13. 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.
    14. Miralles-Quirós, José Luis & Miralles-Quirós, María Mar, 2024. "Factor models and investment strategies in the renewable energy sector," Energy Economics, Elsevier, vol. 132(C).
    15. Annaert, Jan & De Ceuster, Marc & Verstegen, Kurt, 2013. "Are extreme returns priced in the stock market? European evidence," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3401-3411.
    16. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2014. "Clean energy industries and rare earth materials: Economic and financial issues," Energy Policy, Elsevier, vol. 66(C), pages 53-61.
    17. ANNAERT, Jan & DE CEUSTER, Marc & VERSTEGEN, Kurt, 2012. "Are extreme returns priced in the stock market? European evidence," Working Papers 2012018, University of Antwerp, Faculty of Business and Economics.
    18. Daniel Wurstbauer & Stephan Lang & Christoph Rothballer & Wolfgang Schaefers, 2016. "Can common risk factors explain infrastructure equity returns? Evidence from European capital markets," Journal of Property Research, Taylor & Francis Journals, vol. 33(2), pages 97-120, April.
    19. Gbenga Ibikunle & Carmen‐Pilar Martí‐Ballester, 2022. "Can water mutual funds aid sustainable development?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1173-1190, January.
    20. Massa, Massimo & Cheng, Si & Zhang, Hong, 2017. "The Unexpected Activeness of Passive Investors: A World-Wide Analysis of ETFs," CEPR Discussion Papers 11988, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Renewable Energy Stocks; Performance Measurement; Speculative Bubbles; Sup ADF Test; Markov Regime-Switching ADF Test;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:cqe:wpaper:2412. 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: Susanne Deckwitz (email available below). General contact details of provider: https://edirc.repec.org/data/cqmuede.html .

    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.