Green bubble? An analysis of explosive behaviour in the Norwegian stock market

Green investing has never been more relevant than it is today. Investors are flocking to green stocks and 2020 and 2021 saw a record high number of green companies being listed on the Oslo Stock Exchange. As green stocks are new to the market, several of them are growth stocks that have negative earnings due to their high investment levels. The high number of investments being made into green stocks and the price level of these stocks have led many academics and financial analysts to question whether the stock market is experiencing a green bubble. The purpose of this thesis is to investigate whether there is a green bubble in the Norwegian stock market. We use data for 48 green companies that are listed on the Oslo Stock Exchange and Euronext Growth, as well as the OSEBX index representing the Oslo Stock Exchange for comparison. The data is tested for unit roots against periods of exuberance using different variations of the Augmented Dickey-Fuller (ADF) test. We detect periods of exuberance in the OSEBX and among the green stocks. However, there is insufficient evidence to suggest that the stock market is currently experiencing a bubble, yet we discover tendencies that might indicate that a green bubble took place around 2020/2021. Moreover, the thesis will explore the drivers behind asset bubbles to better understand why bubbles occur, and we will see how macroeconomic factors and trends influence stock markets