The impact of COVID-19 on stock prices of solar enterprises: A comprehensive evidence based on the government response and confirmed cases

Abstract

The COVID-19 epidemic has caused a severe impact on global financial markets. Considering that solar energy is an important basis for future energy development, it is particularly imperative to study the destructive effect of COVID-19 on solar energy development. This research thus explores the long-run relationship between COVID-19 and solar enterprises’ stock prices in 24 countries from December 31, 2019 to June 4, 2020. We not only use the number of confirmed cases to measure the severity of the COVID-19 epidemic, but also introduce the government response stringency index to capture the severity of the epidemic. Overall, our evidence indicates a cointegration relation between COVID-19 confirmed cases and the stock prices of solar enterprises, as well as between government response stringency and their stock prices. We also confirm that the COVID-19 epidemic has depressed the stock prices of most solar energy sources according to the long-run parameter estimation, especially with the implementation of a government’s prevention policy toward COVID-19. It is worth noting in the NON-OECD subsample that the negative impacts of the government response stringency index and confirmed cases on solar stock prices are not significant. Therefore, investors can adopt a hedging strategy to reduce losses caused by any fluctuation of these prices, while policymakers should take several measures such as tax deduction to reduce the negative impact of COVID-19 pandemic on the sustainable development of the solar energy sector.