COVID-19, clean energy stock market, interest rate, oil prices, volatility index, geopolitical risk nexus: evidence from quantile regression

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Abstract

Purpose

The outbreak and the spreading of the COVID-19 pandemic have impacted the global financial sector, including the alternative clean and renewable energy sector. This paper aims to assess the impact of the pandemic, COVID-19 on the stock market indices of the clean energy sector using quantile regression methods.

Design/methodology/approach

This study utilized daily data sets on the four major categories of stocks: (1) Morgan Stanley Capital International Global Alternative Energy Index, (2) WilderHill Clean Energy Index, (3) Renewable Energy Industrial Index (RENIXX) and (4) the S&P 500 Global Clean Index. The study adopts a multifactor capital asset pricing model.

Findings

Clean and alternative energy stocks are powerful instruments for diversification. However, the impact of the volatility index induced by infectious disease is negative and significant across quantiles.

Practical implications

For investors and policymakers, considering how the uncertainty caused by COVID-19 and the geopolitical index influences renewable energy markets is of great practical importance. For investors, it throws insights into portfolio diversification. For policy makers, it helps to devise strategies to reboot the economy along the lines of the deployment of renewables. This study sheds light on a global green-energy transition and has practical implications for renewable energy resilience in post-pandemic times.

Originality/value

This paper can be considered as a pioneer that explores the nexus between oil prices, interest rates, volatility index, and geopolitical risk upon the stock indices of clean and alternative sources of (renewable) energy in the COVID-19 pandemic situation. The results have important insights into the area of energy and policy decision-making. Additionally, the paper's novelty lies in using the explanatory variables associated with the Covid 19 pandemic.

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Most cited references 41

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Infected Markets: Novel Coronavirus, Government Interventions, and Stock Return Volatility around the Globe

Adam Zaremba, Renatas Kizys, David Y. Aharon … (2020)

Highlights • We investigate the relationship between policy responses to the COVID-19 pandemic and stock market volatility. • We explore several different non-pharmaceutical interventions in 67 countries. • Stringent policy responses increase return volatility in international stock markets. • The effect is independent from the role of the coronavirus pandemic itself and is robust to many considerations. • Information campaigns and public event cancellations are the major contributors to the growth of volatility.

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Impacts of COVID-19 pandemic on the global energy system and the shift progress to renewable energy: Opportunities, challenges, and policy implications

Anh Hoang, Sandro Nižetić, Aykut I. Ölçer … (2021)

Being declared a global emergency, the COVID-19 pandemic has taken many lives, threatened livelihoods and businesses around the world. The energy industry, in particular, has experienced tremendous pressure resulting from the pandemic. In response to such a challenge, the development of sustainable resources and renewable energy infrastructure has demonstrated its potential as a promising and effective strategy. To sufficiently address the effect of COVID-19 on renewable energy development strategies, short-term policy priorities should be identified, while mid-term and long-term action plans should be formulated in achieving the well-defined renewable energy targets and progress towards a more sustainable energy future. In this review, opportunities, challenges, and significant impacts of the COVID-19 pandemic on current and future sustainable energy strategies were analyzed in detail; while drawing from experiences in identifying reasonable behaviors, orientating appropriate actions, and policy implications on the sustainable energy trajectory were also mentioned. Indeed, the question is that whether the COVID-19 pandemic will kill us or provide us with a precious lesson on future sustainable energy development.