Disclosing Green Bubble Indications in the U.S. Renewable Energy Industry

Michelle Jørgensen & Helle Øye Dyhrfjeld

Student thesis: Master thesis


This thesis seeks to investigate if indications of a run-up to a green bubble can be found in the U.S. renewable energy industry, based on observed market tendencies. A time-series analysis is performed investigating the explanatory effects of contagion proxies and fundamental proxies on stock returns. The analysis was performed on three samples grouped based on the degree of involvement in renewable energy. A green sample with a sole focus on renewables, a grey sample in transition to renewables from fossil fuels and a black sample with a sole focus on fossil fuels. Neither the green nor the black sample exhibited indications of a run-up to a bubble. However, through a cointegration test, the grey sample discloses an indication of a bubble run-up.
In line with previous research, the indicated bubble run-up may be a cause of a positive green reward deriving from the grey sample transitioning to renewables (Görgen et al., 2019). The empirical analysis conveys how fully renewable companies have a significant risk attached to the possibility of not received government support, in addition to dependency on innovation. These risk factors are possible reasons for why the green sample is not benefitting from the deduced green reward like they more diversified grey sample possibly do. If these risks decrease it may allow fully renewable companies to benefit fully from the possible indicated green reward which may foster for a green bubble to grow in the future.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2020
Number of pages156