Correlations and volatility spillovers between oil prices and the stock prices of clean energy and technology companies

Perry Sadorsky

Energy Economics, 2012, vol. 34, issue 1, 248-255

Abstract: In this paper, multivariate GARCH models are used to model conditional correlations and to analyze the volatility spillovers between oil prices and the stock prices of clean energy companies and technology companies. Four different multivariate GARCH models (BEKK, diagonal, constant conditional correlation, and dynamic conditional correlation) are compared and contrasted. The dynamic conditional correlation model is found to fit the data the best and generates results showing that the stock prices of clean energy companies correlate more highly with technology stock prices than with oil prices. On average, a $1 long position in clean energy companies can be hedged for 20cents with a short position in the crude oil futures market.

Keywords: Renewable energy; Multivariate GARCH; Volatility; Oil prices (search for similar items in EconPapers)
JEL-codes: G11 G13 Q42 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (429)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:1:p:248-255

DOI: 10.1016/j.eneco.2011.03.006

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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