The relationship between renewable energy assets and crude oil prices : an empirical analysis with emphasis on the effects of the financial crisis

Abstract

In this thesis I have analysed the relationship between renewable energy stocks and the price of crude oil. As a part of my analysis I have provided a basic economic overview of the research period and how the value of renewable energy stocks and crude oil is determined. In order to analyse this relationship I have utilized a Vector Autoregressive Model (VAR) in addition to a Vector Error Correction Model (VECM). My findings indicate that the aforementioned assets follow a similar growth path between 2000 and 2007, but after 2009 their trends deviate significantly. A fundamental analysis reveal how GDP growth was responsible for the common growth prior to the financial crisis and how it has contributed to their different trends post the financial crisis. In addition I have analysed how the different sub sectors of renewable energy relate to oil prices. My findings indicate that wind and solar energy stocks are unaffected by oil prices, but biofuel commodities index is affected by changes in oil prices.