From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks

Martin T. Bohl, Philipp Kaufmann and Patrick M. Stephan

Energy Economics, 2013, vol. 37, issue C, 40-51

Abstract: Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart four-factor alphas. The radical shift in Germany's energy policy following the 2011 Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices.

Keywords: Renewable energy stocks; Performance measurement; Speculative bubbles; Sup ADF test; Markov regime-switching ADF test (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 Q42 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:37:y:2013:i:c:p:40-51

DOI: 10.1016/j.eneco.2013.01.006

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