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Publication
The efficiency of alternative and conventional energy ETFs: Are clean energy ETFs a safer asset?
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Abstract(s)
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.
Description
Keywords
ETFs Energy Efficiency Covid-19 Diversification Crisis