Risk-return profile of environmentally friendly assets: Evidence from the NASDAQ OMX green economy index family

Sercan Demiralay, Gaye Gencer, Erhan Kilincarslan

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)


The COVID-19 pandemic, geopolitical risks and net-zero targets have created not only pressures but incentives for energy investors. The renewable energy has become the largest energy sector and provided significant investment opportunities. However, companies operating in this sector are highly risky due to economic and political barriers. Therefore, it is of crucial importance for investors to properly assess the risk-return dynamics of these investments. This paper examines the risk-return characteristics of clean energy equities at a disaggregate level using a battery of performance metrics. The main results provide evidence of significant heterogeneity across clean energy sub-sectors; for instance, fuel cell and solar stocks display higher downside risks than the others, while the developer/operator equities are the least risky. The findings further provide evidence of higher risk-adjusted returns during the coronavirus pandemic; as an example, energy management companies appear to provide the highest risk-adjusted returns in the wake of the COVID-19. Comparing the performance with traditional sectors, clean energy stocks outperform certain sectors, including dirty assets. These findings offer important implications for investors, portfolio managers, and policy makers.
Original languageEnglish
Article number117683
Number of pages15
JournalJournal of Environmental Management
Early online date16 Mar 2023
Publication statusPublished - 1 Jul 2023


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