The efficiency of alternative and conventional energy ETFs: Are clean energy ETFs a safer asset?

• Autor(a) principal: Jorge, João Augusto Martins Rendeiro Couceiro
• Data de Publicação: 2022
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.26/43425
• topic: ETFs; Energy; Efficiency; Covid-19; Diversification; Crisis

The relevance of alternative energy sources has been growing exponentially. Therefore, it becomes timely and relevant to explore the performance and diversification capability of financial instruments related to them, particularly during a market downturn. This dissertation assesses the efficiency of alternative energy equity Exchange-Traded Funds (ETFs) and conventional energy equity ETFs in two different time periods that include the COVID-19 pandemic. For that purpose, we employ an output-oriented slacks-based measure Data Envelopment Analysis (DEA) model combined with cluster analysis to determine the efficiency of 69 ETFs in the period 2018-2020. Our results show that alternative energy ETFs can outperform conventional energy ones in terms of efficiency in the long term; however, during a financial crisis period, the differences between the two types of ETFs attenuate, with neither of them significantly outperforming the other. The factors that most affect the efficiency of both ETF categories are the expense ratio and net asset value. Nevertheless, it is interesting to observe that environmental, social, and governance metrics positively affect much more conventional energy ETFs than alternative energy ones, highlighting the increasing importance of this factor in the performance of financial assets.