Reserve currency and the volatility of clean energy stocks: The role of uncertainty

2021-12-01
Kocaarslan, Barış
Soytaş, Uğur
Clean energy firms are among the most risky firms to invest in. Hence, it is essential to have a clear understanding of the risk profile of clean energy stocks. The main purpose of this study is to examine how changes in the reserve currency (US dollar) value affect the volatility of clean energy stocks in the absence/presence of uncertainty information. To this end, the volatility of clean energy stocks is first obtained by considering uncertainty information in the exponential generalized autoregressive conditional heteroskedastic (EGARCH) volatility estimates. Then, using the autoregressive distributed lag (ARDL) model, this study investigates the effect of reserve currency (US dollar) value fluctuations on the volatility of clean energy stocks. Controlling for monetary conditions, financial stress, and business cycle fluctuations, the study finds that, in the absence of uncertainty information, the volatility of clean energy stocks is not influenced by US dollar fluctuations. However, an appreciation of the US dollar against major foreign currencies significantly increases the volatility of clean energy stocks when uncertainties about economic policy, exchange rate market, and gold market are included in the picture. We find that economic uncertainty mediates the link between reserve currency and the volatility of clean energy stocks. The results shed more light on the risk profile of clean energy stocks and suggest the need for predictable and stable policies to increase the attractiveness of clean energy stocks.
ENERGY ECONOMICS

Suggestions

The impact of variable renewable energy technologies on electricity markets: An analysis of the Turkish balancing market
Sirin, Selahattin Murat; Yılmaz, Berna Nisa (2021-04-01)
As global investment in renewable energy technologies continue to trend upward, the effects of variable (intermittent) renewable energy technologies on power markets have created serious challenges for regulators and policymakers. The literature on the effects of these technologies on day-ahead markets has been well established; however, further research is required on intra-day and real-time (balancing) markets to understand how these technologies are changing electricity market dynamics. In this respect, ...
Risk Transmission from Oil and Natural Gas Futures to Emerging Market Mutual Funds
Ewing, Bradley T.; Gormus, Alper; Soytaş, Uğur (2018-01-01)
This study evaluates the impacts of energy markets on emerging market mutual funds (EMMFs). In particular, we investigate the volatility transmission between these funds and the oil and natural gas prices. The findings suggest significant risk spillover from the energy markets to EMMFs. Furthermore, we find a large number of EMMFs' risk transmitting to oil prices and almost all of the EMMFs' risk transmitting to natural gas prices. By dividing the sample into two (before and after 2008), we find the EMMFs' ...
Asymmetric pass-through between oil prices and the stock prices of clean energy firms: New evidence from a nonlinear analysis
Kocaarslan, Baris; Soytaş, Uğur (2019-11-01)
There is an ongoing debate on how oil prices affect the stock prices of clean energy companies. We contribute to this debate by questioning the possibility of asymmetric linkages between oil prices, interest rates, and the stock prices of clean energy and technology firms. Using a recently developed approach (nonlinear auto-regressive distributed lag (NARDL) model), we document that ignoring the presence of nonlinearities leads to misleading results. The analyses reveal significant asymmetric effects among ...
Dynamic correlations between oil prices and the stock prices of clean energy and technology firms: The role of reserve currency (US dollar)
KOCAARSLAN, BARIŞ; Soytaş, Uğur (2019-10-01)
There is increased interest in the dynamic relationships between the stock prices of clean energy and technology firms and oil prices in the literature. Existing works suggest a time-dependent link between them, but there is a gap of knowledge regarding the drivers of this time-dependent relationship. To contribute to this literature, we first identify dynamic conditional correlations (DCCs) between the prices of clean energy and technology stocks and oil prices to investigate the nature of these dynamic co...
Price and volatility linkages between international REITs and oil markets
Nazlıoğlu, Şaban; Gupta, Rangan; Gormus, Alper; Soytaş, Uğur (Elsevier BV, 2020-05-01)
This study analyzes price and volatility transmissions between nineteen real estate investment trusts (REITs) and the oil markets. The REITs data represents a variety of countries at different stages of their development and the expanded analytical approach includes accounting for structural shifts as gradual processes - as opposed to strictly abrupt processes typically assumed in the literature. Oil prices are found to primarily predict REITs prices in mature REITs markets, but the feedback from REITs to o...
Citation Formats
B. Kocaarslan and U. Soytaş, “Reserve currency and the volatility of clean energy stocks: The role of uncertainty,” ENERGY ECONOMICS, vol. 104, pp. 0–0, 2021, Accessed: 00, 2021. [Online]. Available: https://hdl.handle.net/11511/94854.