The link between metal prices and clean energy stocks : Can energy metals act as hedges or safe havens?

This thesis studies whether energy metals can act as hedges or safe havens for clean energy stocks, following the framework of the widely accepted and used methodology made popular by Baur and Lucey (2010) and Baur and McDermott (2010). More specifically, the relationship between five clean energy stock indices, and six metals that are most affected by the growth in clean energy solutions demand is examined. The sample used in the thesis is collected from the period between April 2011 and April 2021, which includes observations from the COVID-19 pandemic period. Furthermore, the period under study sees significant investment into clean energy as capital deployed to clean energy generation during the sample period triples from the previous decade. The results indicate a statistically significant non-linear relationship between the price returns of most metals included in the study and clean energy stock indices. All energy metals, except for cobalt, have a significant positive relationship with clean energy stocks on average. Evidence from regression estimates shows that the positive relationship is also present during extreme market shocks in most cases. None of the energy metals act as hedges to clean energy stocks but the results support existing vast literature on the hedging properties of gold, as evidence is found on gold serving as a hedge for stocks in certain clean energy subsectors. According to regression estimate results, and following the chosen methodology, we also find evidence of silver acting as a strong safe haven for clean energy stocks. Findings include some affirmation for golds safe haven properties, but results are not as conclusive as for silver. As a by-product of answering the research hypothesis, this study summarizes findings on the current and expected dynamics of energy metal markets and clean energy markets from previous studies and relevant sector reports. By analyzing the empirical results from the regression model and the information on energy metal market dynamics, we highlight several issues that might influence the relationship between energy metals and clean energy stocks