Analysing renewable energy stock performance: insights from oil and technology market interactions
Praveen Kumar Sahoo, Gopal Acharya, Dushyant Ashok MahadikPurpose
This study investigates how oil price returns and technology stock performance influence the returns of renewable energy equities, with a particular focus on the heterogeneity of these relationships under different market conditions.
Design/methodology/approach
Employing Powell’s (2022) panel quantile regression model within an extended Fama-French-Carhart asset pricing framework, the analysis captures firm-level return dynamics across the conditional distribution of returns. The study utilises a panel of renewable energy firms listed in the Indian stock market.
Findings
Results reveal a consistently negative association between oil price returns and renewable energy stock performance, with this inverse relationship amplifying during extreme quantiles. Additionally, the relationship between technology stock returns and renewable energy stocks is found to be asymmetric and non-linear, varying significantly across market regimes.
Research limitations/implications
The research enhances understanding of the vulnerability of renewable energy stock pricing by incorporating oil and technology stock returns into an asset-pricing framework in emerging markets such as India, thereby highlighting the importance of dynamic investment strategies.
Practical implications
The findings highlight the need for adaptive portfolio strategies that consider underlying market regimes. For investors and policymakers, incorporating sector-specific interactions and market condition heterogeneity is critical to optimising investment performance and managing exposure in green portfolios.
Originality/value
Unlike prior studies that primarily focus on developed markets and average relationships, this study provides novel evidence that the effect of oil prices and technology stock performance on renewable energy stocks varies across market conditions in India. By highlighting the state-dependent nature of these relationships, the study extends the renewable energy asset-pricing literature in emerging markets.