Attractiveness of Clean Energy Stocks in Europe: The Importance of Shocks in Oil and Gas Prices
Abstract
Europe is heavily dependent on both oil and gas imports. This article identifies supply and
demand shocks in the oil and gas market using monthly data (from January 2008 to December
2021) and explores their impact on clean energy stock returns in Europe. Our results show that
a negative gas supply shock positively affects clean energy stocks, while a negative shock in
global oil supply does not have a significant effect on clean energy stocks throughout the period
studied. Moreover, both oil-specific demand shocks and gas-specific demand shocks positively
affect the stock returns of clean energy companies. Finally, the positive effect of economic
demand shocks on the stock returns of clean energy lasts longer in the model with oil price
shocks than in the model with gas price shocks. The previous results suggest that clean energy
is a substitute to gas and oil. Consequently, as prices increase, like in today´s context due to the
Ukrainian conflict, we are to observe a sharp increase in clean energy returns.
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