Alternative Energy Indexes and Oil

Alper Gormus, N.; Sarkar, Salil
August 2014
Journal of Accounting & Finance (2158-3625);2014, Vol. 14 Issue 4, p52
Academic Journal
Numerous studies evaluate the effects of oil price shocks on the stock market. However due to it being a recent phenomenon, models about alternative energy source related companies are relatively rare. In this study, the effects of oil price shocks on the performance of alternative energy companies, including renewable sources, are explored. The study also evaluates the effects of 'carbon market' on renewable alternative energy stocks. We found using Vector Auto Regression analysis that oil prices have a significant effect on the performance of alternative energy firms both renewable and nonrenewable types, including some of the newly emerging alternative energy sources. In line with past results, this paper also finds natural gas stocks to be most sensitive to oil shocks, whereas, alternative energy stocks are found to be very responsive as well. This study creates a hierarchical view of how each alternative reacts to fluctuations in oil prices in order to aid investors in market anticipation and portfolio diversification.


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