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The authors analyze the impact of COVID-19 on listed European electricity companies and differentiate between renewable and traditional electricity, to show the heterogenous characteristics of electricity subsectors and the differences between renewable and traditional electricity.

Using the event study method, the authors calculate the cumulative average abnormal returns (ARs) before and after the World Health Organization pandemic announcement and the declaration of national lockdowns in Europe.

The results show that while the European electricity sector was overall negatively impacted by the COVID-19 announcement, this impact was larger for renewable companies due to their riskier investment profile. Moreover, after the national lockdowns came into effect, the recovery in the financial markets return was smaller for the latter.

There may be variables to be included in the model to analyze possible differences between companies and countries, as well as alternative econometric models. Limited to the data, the authors did not investigate the different impact of the economic policy uncertainty from various countries inside or outside the EU.

The results have important implications for both investors and policymakers since the heterogenous characteristics of electricity subsectors. This heterogeneity prompts different investor reactions, which are necessary to know and to understand.

As far as the authors know, this is the first study that analyses the effect of COVID-19 in heterogeneity profile of both types of electricity, renewable and traditional.