Browsing by Author "Ding, Hongkai"

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    Prediction of WilderHill Clean Energy Index Directional Movement
    (Rice University, 2023-05-08) Du, Yolanda; Lu, Lu; Ding, Hongkai; McGuffey, Elizabeth; Li, Meng
    The popularity of clean energy has risen recently due to concerns about climate change and the exhaustion of traditional energy sources. The stock price of clean energy companies reflects the public’s attention to the industry’s growth potential, and clean energy stocks are among the riskiest stocks to invest in. Thus, it is important to apply quantitative methods to analyze the financial risks and returns of renewable energy stocks. Prior works on the topic are mainly focused on inference rather than predictions of renewable energy stock prices. In this investigation, the directional movement of the WilderHill Clean Energy Index is predicted using machine learning methods including logistic regression, random forest, and neural networks. Using data including technical indicators and macroeconomic variables, the aim is to predict the movement of the WilderHill Clean Energy Index with high accuracy. The results suggest that for the classification models with two directions, random forest and neural networks outperform full logistic regression and stepwise logistic regression. For the classification models with a three-category target variable, random forest and neural networks models outperform full logistic regression and stepwise logistic regression in overall accuracy; however, the methods give varying results for different outcome classes, in regards to sensitivity and specificity. In addition, the relationship between renewable energy stock directional movement and independent variables is investigated. The results suggest that two important macroeconomic variables are West Texas Intermediate crude oil prices and NYSE Arca Tech 100 Index.