Abstract
This study uses stochastic dominance tests to test the relative returns between conventional and clean energy stocks during different oil market conditions. We use the Barrett Donald test to test the dominance between conventional and clean energy stocks. Our sample consists of daily return data of 13 energy indexes from 2010 to 2022. Our results show that conventional energy stocks dominate the clean energy stock during extreme upward oil market conditions (top decile of oil returns) while clean energy stocks dominate the conventional energy stocks in other market conditions (first decile to the ninth decile of oil market returns). Results show a relatively lesser correlation between clean energy stocks with extremely high oil market returns and are consistent with the decoupling hypothesis of clean energy stocks. Our results also show that extreme upward oil market conditions carry good news for conventional energy stocks rather than bad news, as previously thought. Results also show that conventional energy stocks move more with oil market price shocks than clean energy stocks during different market conditions.
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Usman, M. A stochastic dominance analysis of conventional and clean energy stocks during different oil market conditions. Empir Econ 65, 875–897 (2023). https://doi.org/10.1007/s00181-023-02359-0
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DOI: https://doi.org/10.1007/s00181-023-02359-0