TY - JOUR
T1 - Chasing the ‘green bandwagon’ in times of uncertainty
AU - Dragomirescu-Gaina, Catalin-Florinel
AU - Galariotis, Emilios
AU - Philippas, Dionisis
PY - 2021
Y1 - 2021
N2 - The transition to a low-carbon economy poses significant challenges for investors in energy markets, entailing higher uncertainty and not just higher risks. On the back of the ongoing greening in investment preferences, we focus on investors' group behaviour with respect to U.S. energy equities, which lie at the crossroads in this energy transition phase from an old technology that relies heavily on oil, to a new, greener one. Based on a dynamic herding metric, we find that changes in investors' behaviour with respect to green asset allocations require a better information set than in the case of crude oil allocations, for which only information on returns is a relevant driver of behaviour. We argue that policy uncertainty is better than financial risk proxies in reflecting the multidimensional nature of uncertainty and the various risks associated with investing in green energy today. Our findings suggest the need to reduce uncertainty stemming from the policy realm, given its raising impact on investors’ portfolios on the back of higher allocations towards greener assets.
AB - The transition to a low-carbon economy poses significant challenges for investors in energy markets, entailing higher uncertainty and not just higher risks. On the back of the ongoing greening in investment preferences, we focus on investors' group behaviour with respect to U.S. energy equities, which lie at the crossroads in this energy transition phase from an old technology that relies heavily on oil, to a new, greener one. Based on a dynamic herding metric, we find that changes in investors' behaviour with respect to green asset allocations require a better information set than in the case of crude oil allocations, for which only information on returns is a relevant driver of behaviour. We argue that policy uncertainty is better than financial risk proxies in reflecting the multidimensional nature of uncertainty and the various risks associated with investing in green energy today. Our findings suggest the need to reduce uncertainty stemming from the policy realm, given its raising impact on investors’ portfolios on the back of higher allocations towards greener assets.
KW - Dynamic herding, Pricing dynamics, Green energy, Crude oil
KW - Dynamic herding, Pricing dynamics, Green energy, Crude oil
UR - http://hdl.handle.net/10807/188705
U2 - 10.1016/j.enpol.2021.112190
DO - 10.1016/j.enpol.2021.112190
M3 - Article
SN - 1873-6777
VL - 151
SP - N/A-N/A
JO - ENERGY POLICY
JF - ENERGY POLICY
ER -