Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach

• Published in: Energy economics 2023-08, Vol.124, p.106771, Article 106771
• Main Authors: Ahmed, Walid M.A., Sleem, Mohamed A.E.
• Format: Article
• Language: English
• Subjects: Clean energy; Dynamic ARDL simulations; Elastic net; Sustainability; US stock market
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2023.106771

This paper aims to identify factors that drive US clean-energy stock price movements in the short and long term, using a wide range of variables representing the carbon emission market, non-green financial assets, non-renewable commodities, macroeconomic fundamentals, investor attention and sentiment, and global stress and uncertainty. The empirical investigation is carried out in the context of the elastic-net regularization (ENET) approach and dynamic simulations of the autoregressive distributed lag (DYNARDL) model, with proper consideration to the potential presence of structural changes. From among 26 candidate variables, the ENET selects the clean technology market, public attention to clean energy, oil, and gold as the primary factors contributing the most to the behavior of clean-energy stock prices. The estimation results of the DYNARDL model suggest that the clean technology market and oil are vital determinants in the short and long run, while public attention and gold tend to affect clean-energy stock prices only in the short run. Furthermore, the respective magnitudes of influence of the four variables are larger in the short term than in the long term. Our findings offer practical implications for socially responsible investors and policymakers. •We identify the major drivers of US clean-energy stock price movements in both the short and long term.•We assess the relevance of 26 candidate factors representing key economic and financial dimensions.•The analysis relies on the elastic-net regularization method and dynamic simulations of ARDL.•Gold and public attention are vital determinants of clean-energy stock prices only in the short run.•The global clean technology market and oil are important determinants in the short and long run.