The impact of Government infrastructure plans on the new energy industry of the US stock market

Abstract

This paper takes Biden's new infrastructure Plan as an example to study the relationship between the relevant US. Government policies and new energy stock market in America. Due to the intensification of pollution from burning fossil fuels which causes global warming, most countries are committed to developing new energy and realizing industrial transformation. In recent years, the importance of the new energy industry can be seen from the government policies in the USA. Power is usually closely related to the economy, and policy changes can easily influence the new energy stock market. Therefore, the impact of the American government's infrastructure plans on the US's new energy stock market is an essential topic. The stock price is an indicator of the volatility of the renewable energy stock market, which contains some representative companies of solar energy, wind energy, new energy vehicles, and nuclear energy. Since Biden's infrastructure is a new policy that has just been issued for half a year, I can only get limited data and analyze its impact on the new energy stock market in the short term (1 year). The vector autoregression (VAR model) and generalized autoregressive conditional heteroskedastic model (GARCH model) are used to compare the changes of stock prices expected to return before and after the release of the policy. The Robustness Check proves there are no structural changes. Generally speaking, the government's policy of supporting the development of new energy will promote industrial production and consumption to a certain extent and stimulate the rise of stock prices. Due to some limiting factors, my analysis results can not directly prove that Biden's new plan significantly impacts the return of new energy stocks. Still, it can be seen that contrary to expectations, this impact may not be undeniable in the short term, and even the opposite trend can be seen from some stocks. However, it is foreseeable that this policy will positively impact the long-term development of new energy. Also, this research can help the government formulate new infrastructure plans in the future.