Blue horizons: factor analysis of water and clean energy equity portfolios

Cristiana Tudor, Vasileios Vlachos, Pavlos Stamatiou and Felix Villalba-Romero

Review of Accounting and Finance, 2026, vol. 25, issue 2, 149-179

Abstract: PurposeThe blue economy includes a variety of economic activities and provides a remarkable contribution to sustainable development. This paper aims to assess the financial performance of diverse sustainable economy activities and evaluate whether blue firms based on natural resources, mainly water behave compared with clean energy firms and in contrast to a broad-market benchmark.Design/methodology/approachThe study estimates per-exchange traded fund (ETF) time-series Capital Asset Pricing Model (CAPM)/ Fama-French Three-Factor (FF3)/ Fama-French Five-Factor (FF5) models on daily excess returns from July 2008 to November 2024. Coefficients are obtained by ordinary least squares (OLS) with Newey–West/HAC standard errors to address heteroskedasticity and serial correlation. As a robustness check, the study also runs a pooled regression with factor×ETF interactions to test cross-ETF equality of factor loadings (Wald tests). This design provides a robust empirical assessment of the risk–return drivers for blue economy and clean energy ETFs within standard asset-pricing theory.FindingsThe results show how blue economy water-related investments are more profitable, less volatile and follow more conservative investment policies than renewable energy investments. Findings also suggest a preference for value-driven firms within water-related industries, while clean energy firms are often growth-oriented. This confirms that the blue economy firms should be preferred to clean energy firms, within the investment portfolios following a binomial risk-return strategies.Originality/valueBlue economy stocks are increasingly gathering the interest of investors which follow a risk-return strategy but also include sustainable development principles in their investment decisions. While some studies have analyzed the impact of green and other sustainable factors in the financial performance and investors preferences, to the best of the authors’ knowledge, this study is the only one or among the very few that conduct this analysis within blue economy stocks.

Keywords: Performance measurement; Investment; Market efficiency (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rafpps:raf-04-2025-0139

DOI: 10.1108/RAF-04-2025-0139

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