Are European Renewable Energy Equities Experiencing an Asset Price Bubble, and When Should Monetary Policy Respond? An empirical study of European equity markets.

Abstract

The purpose of this thesis is to identify whether European renewable energy equities are experiencing an asset price bubble, and when monetary policy should respond. Dillian (2020) speculated in the possibility of a stock market bubble in ESG investing, whereas Wimmer (2016) suggested that a bubble could potentially be evolving within renewable energy. To answer the research question, we examine and compare the pricing of renewable and conventional energy companies in five European countries, as well as benching both groups against the overall markets. We are not able to conclude certainly that European renewable energy equities are currently experiencing an asset price bubble. However, we are also not able to conclude that it is not. We suggest that monetary policy should respond to an eventual future asset price bubble within the renewable energy sector ex-post.