Please use this identifier to cite or link to this item:

Title: Dynamic comparison of portfolio risk: Clean vs dirty energy
Miguel, Jesús
Salvador, Manuel Juan ORCID SCOPUSID
Keywords: Portfolio selection; Risk management; ADCC-GARCH; Clean energies; Fossil fuels; Energy transition
Issue Date: Jun-2022
Publisher: Elsevier
Citation: Pilar Gargallo, Luis Lample, Jesús Miguel, Manuel Salvador,Dynamic comparison of portfolio risk: Clean vs dirty energy, Finance Research Letters,Volume 47, Part A,2022,102957,ISSN 1544-6123,
Abstract: This paper analyses whether investing in clean energy significantly worsens the risk level of in-vestors. To that aim, we propose a dynamic strategy to carry out a comparative risk analysis of three minimum-variance portfolios: a portfolio made up exclusively of dirty energies, a portfolio made up only of clean energy assets, and a portfolio combined with the two types of energies. To that aim, we use multivariate GARCH models, concretely Asymmetric Dynamic Conditional Correlations models (ADCC-GARCH) to predict the variance and covariance matrices of the daily asset returns and we compare the portfolio volatilities using the methodology proposed by Engle and Colacito (2006). The analysed period was from January 2010 to September 2021, so that the data include half of phase II, full phase III and the onset of phase IV of the EU ETS, as well as the Brexit and COVID-19 outbreaks in the European context. Our results show that, unlike what happened in other economic crises (subprime, Brexit), from the pandemic crisis, the investment in clean energies is preferable to fossil energies, not only in terms of profitability, as other studies have shown, but also in terms of risk. Therefore, investing in clean energy companies, which are aligned with their role towards socially responsible initiatives, is valuable not only for its contribution to a sustainable energy transition to renewable sources but also for the attractiveness from a financial point of view.
ISSN: 1544-6123
Appears in Collections:Artículos de revistas

Files in This Item:
File Description SizeFormat 
Dynamic comparison of portfolio risk.pdf541,26 kBAdobe PDFThumbnail

This item is licensed under a Creative Commons License Creative Commons