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Systematic Risk Factors of Renewable Energy Companies in Emerging Markets

Student: Volodin Gleb

Supervisor: Elena V. Chirkova

Faculty: Faculty of Economic Sciences

Educational Programme: Economics (Bachelor)

Final Grade: 8

Year of Graduation: 2019

The main purpose of the paper is to explore the determinants of systematic risk for the renewable energy (RE) sector in emerging markets. The main contribution of the work is that it reveals the nature of the relationship between the volatility of oil price returns and the systematic risk in the field of renewable energy. The increase in volatility in the hydrocarbon market reduces the systematic risk in the «green energy» industry and decreases the returns of this sector, which is confirmed empirically on a sample of 42 public companies located in 6 different developing countries. In addition, a significant impact on the systematic risk and return is made by legislative infrastructure, government subsidies and the country's experience in the field of renewable energy that are reflected in the model via Climatescope rating published annually by Bloomberg New Energy Finance. Finally, we demonstrate that the previous version of the systematic risk model (variable beta model) can not be used due to the high multicollinearity caused by the model’s imperfections and offer a new method for systematic risk modelling.

Full text (added May 10, 2019)

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