The impact of energy and agriculture prices on the stock performance of the water industry

Water issues are receiving increasing attention from policy-makers and international organizations due to water scarcity and global rising demand. Given that the demand for water is mainly driven by agriculture and energy, we use a multifactor market model to analyze the impact of agriculture and energy price trends on the price of listed companies operating in the water industry. Evidence highlights a sensitivity of water stocks returns to agriculture and energy price changes. Additionally, when using state space model to estimate dynamic beta coefficients, factor sensitivities show a time-varying behavior, especially during the 2008 economic and financial crisis.