Common volatility in clean energy stocks

Linh Pham, Son Pham, Hung Do, Emawtee Bissoondoyal-Bheenick and Robert Brooks

Energy Economics, 2025, vol. 148, issue C

Abstract: This study investigates common volatility (COVOL) within the clean energy sector, motivated by the sector’s growing importance and its susceptibility to external shocks. For this purpose, we use the COVOL measure developed by Engle and Campos-Martins (2023) to explore sector-wide and sub-sector common volatility, in a range of sub-sectors including renewable energy, energy storage, energy conversion, power conservation, and greener utilities. Our analysis highlights the major events that significantly impact the volatility of clean energy stocks. These include global economic disruptions, geopolitical tension, policy changes and climate-related events. Other key findings reveal the heterogeneous association of sub-sectors’ COVOL to different economic and financial factors, alongside superior explanatory power of COVOL on clean energy risk and return compared to alternative news-based uncertainty measures. These insights emphasize the importance for investors to integrate thorough risk management strategies and for policymakers to create a stable, supportive environment for the clean energy market. The study’s implications extend to enhancing sector resilience and informing strategic investment and policy decisions, contributing to the sustainable growth of clean energy amidst global economic and environmental uncertainties.

Keywords: Clean energy; Renewable energy; Sustainable finance; COVOL; Common volatility; Geopolitical risks (search for similar items in EconPapers)
JEL-codes: C32 C58 G10 Q25 Q30 Q40 (search for similar items in EconPapers)
Date: 2025
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325004165

DOI: 10.1016/j.eneco.2025.108592

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