The European renewable energy sector in calm and turmoil periods: The key role of sovereign risk

Karine Constant (), Marion Davin (), Gilles de Truchis and Benjamin Keddad ()
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Karine Constant: UO - Université d'Orléans
Marion Davin: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier
Benjamin Keddad: PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: This paper explores the comparative role of sovereign default risk and several highfrequency macrofinancial indicators that may explain the drop in European renewable energy stocks observed during the 2008 financial crisis and the European debt crisis. We use a two-state time-varying transition probability Markov-switching model to investigate how they impact the bull and bear market trends of renewable stocks. Our main finding is that public financing conditions, captured by sovereign default risks, play a key role in both market regimes, while the other variables affect the renewable energy stocks only in calm or turmoil periods. Moreover, sovereign risk is identified as the main determinant of the European renewable energy stock dynamics in both regimes in the period under review. Finally, we suggest that this effect may be due to the sensitivity of investors to the energy policy uncertainty, entailed by such a pressure on public finances.

Keywords: Renewable energy; Stock prices; Financial crisis; European debt crisis; Markov-switching model (search for similar items in EconPapers)
Date: 2023-12-15
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-04346858v1
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Related works:
Journal Article: The European Renewable Energy Sector in Calm and Turmoil Periods: The Key Role of Sovereign Risk (2024)
Working Paper: The European Renewable Energy Sector in Calm and Turmoil Periods: The Key Role of Sovereign Risk (2024)
Working Paper: The European renewable energy sector in calm and turmoil periods: The key role of sovereign risk (2023)
Working Paper: The European renewable energy sector in calm and turmoil periods: The key role of sovereign risk (2023)
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