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

Abstract

PurposeThe outbreak and the spreading of the COVID-19 pandemic has 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/approachThis 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.FindingsThe clean and alternative energy stocks are significant instruments for diversification. However, the impact of the volatility index induced by infectious disease is negative and significant across quantiles.Practical implicationsFor investors and policymakers, considering how uncertainty caused by COVID-19 and geopolitical index influences renewable energy markets is of great practical importance. For investors, it throws insights on portfolio diversification. For policy makers, it helps to devise strategies to reboot the economy along the lines of 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/valueThis paper can be considered as a pioneer that explores the nexus between oil prices, interest rates, volatility index, 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 in the area of energy and policy decision-making. Additionally, the novelty of the paper lies in the use of the explanatory variables, which is associated with the COVID-19 pandemic.