The Impact of Stock Prices of Polluting Energy Sources on Renewable Energy Stock Index Prices

Serap Vurur, N.; Özdemir, Letife; Özen, Ercan; Grima, Simon

doi:10.2478/foli-2024-0029

Abstract

Research background

The link between the price of polluting energy supplies and the renewable energy stock index may be intricate and subtle. Investors need to conduct thorough inquiries and analyses to completely understand the correlation between these industries.

Purpose

This study aims to explore the intricate dynamics between renewable energy stocks and conventional fossil fuel-based resources.

Research methodology

Our analysis encompasses daily data spanning from June 9, 2012, to March 31, 2023, extracted from the WilderHill New Energy Global Innovation Index (NEX), Crude Oil (WTI OIL), Coal (COAL), and Natural Gas (NGAS). Key statistical tests include the Johansen co-integration test, the fully modified ordinary least squares (FMOLS) test, and the Granger causality test.

Results

The study shows a long-term co-integration relationship between renewable energy stocks and polluting energy sources. Oil prices positively impact the renewable stock index, while coal prices negatively affect it. Natural gas prices also positively correlate with the index, and short-term relationships exist with oil prices.

Novelty

The study provides valuable insights for investors, state authorities, and policymakers on optimising ESG portfolio diversification and sustainable development policies in energy, environment, and climate. It helps stakeholders understand investor behaviour, market trends, and policy impacts, enabling effective long-term investment strategies.

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