A0814
Title: Green bubbles: A novel paradigm of detection and propagation
Authors: Luigi Grossi - University of Padova (Italy)
Gian Luca Vriz - University of Padova (Italy) [presenting]
Abstract: Following the Great Recession, a term known as the green bubble started to gain popularity in academic literature, referring to a situation where the world is over-investing in renewable energy sources. Numerous studies have revealed a meaningful relationship between clean energy, high technology stocks, and oil prices. However, the true impact of a green bubble is still being explored. Excessive market behaviour is detrimental not only in terms of financial stability but also to the credibility of the transition process. The adoption of a long-term risk horizon is, therefore, crucial for preventing a rapid adjustment in asset prices and a so-called climate Minsky moment. In this context, the focus is on the renewable energy market, with the primary objective of contributing to the ongoing discussion pertaining to the potential impacts of green bubbles. Employing econometric models, the analysis delineates climate sentiment as a key determinant of the current speculative behaviour. Subsequently, the examination of migration and propagation effects aims to extract significant implications concerning financial stability. The outcomes of this research will provide policymakers with a more robust framework for evaluating the financial risks entailed by climate change.
