Do Investors in Clean Energy ETFs Herd? The Role of Climate Risks

Vassilios Babalos (), Xolani Sibande (), Elie Bouri () and Rangan Gupta ()
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Vassilios Babalos: Department of Accounting and Finance, University of Peloponnese, Kalamata, Greece
Xolani Sibande: Department of Economics, University of Pretoria, Pretoria, South Africa
Elie Bouri: Adnan Kassar School of Business, Lebanese American University, Lebanon
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202512, Working Papers from University of Pretoria, Department of Economics

Abstract: This study offers new insights into the herding behaviour in US clean energy Exchange-traded funds (ETFs) over the period from May 1, 2016 to June 19, 2024. The baseline model shows significant herding. An extended mode indicates that herding is present in both down and up markets, with a stronger effect in the down market, suggesting an asymmetry. Herding is also found to be time-varying. Further analysis shows that the transition climate risk, particularly its high level, reduces the probability of herding in clean energy ETFs, whereas physical climate risk does not exert any significant impact on the probability of herding. Thus, large levels of transition climate risk seem to encourage market efficiency in clean energy ETFs and climate-hedging behavior by investors.

Keywords: Herding Behaviour; Climate Change; Clean Energy (search for similar items in EconPapers)
JEL-codes: G14 P18 Q54 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2025-04
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