What impacts wind and solar stock prices? Evidence before and after the financial crisis of 2008

Abstract

This thesis investigates the value drivers of wind and solar energy stocks. Through a lag-augmented vector autoregressive model, we test the impact of shocks to interest rates, oil prices and technology stocks on the stock performance of the two renewable energies. The study uses Granger causality tests, impulse response functions and variance decomposition in order to determine the relationships. The study is conducted before and after the Great Recession. The results show differences from the first period to the second, indicating that increases in technology stocks lead to increases in wind and solar stock prices in the pre-crisis period. This relationship is almost absent in the post-crisis period. Oil prices proves only to be weakly significant in the period after the crisis, and changes in interest rates are, surprisingly, not significant to the performance of the renewables in neither of the two periods. Our study presents findings on wind and solar energy stock prices, which contrast from previous research that investigated characteristics of renewable energy stock prices as a whole.