Hedging potentials of green investments against climate and oil market risks

Purpose This study aims to examine the ability of clean energy stocks provide cover for investors against market risks related climate change and disturbances in oil market. Design/methodology/approach The adopts feasible quasi generalized least squares technique estimate a predictive model based on Westerlund Narayan’s (2015) approach evaluating hedging effectiveness stocks. out-of-sample forecast evaluations risk-based models are explored using Clark West’s (2007) modified Diebold & Mariano evaluation test nested non-nested models, respectively. Findings finds ample evidence that may hedge risks. result is robust alternative measures risk holds when applied data from COVID-19 pandemic. In contrast, limited 4 6 indices restricted measured with policy uncertainty. Originality/value contributes literature by providing extensive analysis several (global, United States (US), Europe Asia) sectoral (solar wind) various (WTI (West Texas intermediate) Brent volatility) (climate uncertainty environmental regulation) as predictors. It also conducts models.