A Lag Augmented Vector Autoregressiue Analysis Of Clean Energy Stocks Before And After The Paris Agreement

Abstract

The main goal of this paper is to investigate if determining factors of clean energy stock performance in Europe have been influenced by the Paris Agreement. The analysis consist of three models in the time period before the Paris Agreement, and three models in the time period after the Paris Agreement. The models consist of variables related to the stock- and energy market and climate factors as well as a European clean energy index. To conduct our analysis we utilize a LA-VAR and a VAR framework. Using the results from this we examine the Granger causality, impulse responses and variance decomposition. The main findings of this paper are the shift in Granger causality before and after the Paris Agreement. We find that the stock market factors Granger-causes the clean energy index prior to the Paris Agreement, but not following the Agreement. On the other hand, we find that the climate- and energy factors do not Granger-cause the clean energy index prior to the Paris Agreement, but Granger-causes in the period following the Paris Agreement. This indicates that the Paris Agreement have influenced determining factors of clean energy stock performance in Europe.