Factor models and investment strategies in the renewable energy sector

José Luis Miralles-Quirós and María Mar Miralles-Quirós

Energy Economics, 2024, vol. 132, issue C

Abstract: The growing concern about the natural environment is getting relevance not only on institutional investors but also on individual ones. However, these retail investors face some difficulties, such as the fact that they are often not able to monitor many assets but they are also unable to use most of the methodology proposed in the empirical evidence because it is not feasible for them. We avoid these problems by proposing an investment strategy based on the different values of the alpha and beta coefficients from the Fama-French and Carhart models. We use Exchange Traded Funds (ETFs) which track companies involved on clean and renewable energy businesses and it is provided evidence that in most of the cases the best investment strategy is to follow the positive and significant values of the alphas from the estimated models and to hold the portfolio for a short period of time. Additionally, we also report that the signals from the coefficients associated to the value factor (HML) must not be undervalued. Finally, we demonstrate that wind, clean energy and solar energy sectors are the most important renewable energies for investors. These findings reinforce the importance of investing on renewable companies using ETFs.

Keywords: Renewable energies; Fama-French; Factor models; Exchange traded funds; Investment strategies (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001919

DOI: 10.1016/j.eneco.2024.107483

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