Tesla Motors produces electric vehicles. Yesterday, it had its IPO and its current market share price is higher than expected . While I have never written a "finance paper", this case study offers a great opportunity for environmental economists to conduct some simple "event study" before/after comparisons;

Some Questions:

1. As Congress announces new tighter fuel CAFE standards, could this lower Tesla's stock price as other manufactures would invest more in electric cars? As California tightens its Pavley Standards what happens to Tesla's stock price rate of return? Relative to a control group (say the average stock price change for General Motors and Ford), does Tesla earn "excess returns" if government passes Climate Change legislation such as a carbon tax this would increase Tesla's stock price.

2. How positively correlated is the change in Tesla's stock price with increases in gas prices? If gas prices are rising and expected to stay high (peak oil), this should increase the demand for electric vehicles and raise Tesla's stock price.

3. How does the Tesla stock price move as Nissan makes new credible announcements about the development of its electric "Leaf"? It looks to me that the Leaf will be a "poor man's Tesla". If they are close substitutes, then Tesla's stock holders better be ready for some sleepless nights as they wait for Nissan Leaf announcements.

The beauty of a stock market is the real time continuous trading provides up to date information about the collective wisdom of this "green" company's financial health. This will help economists to see if the "green economy" is succeeding. A company such as Nissan makes many different cars and the Leaf is just one part of its portfolio --- thus its stock price isn't that informative about the expected profitability from making green, electric vehicles.

Since we all embrace the efficient markets hypothesis, the Tesla stock price today provides the best guess about the expected present discounted value of profits to be earned by electric car sales. This is a very good indicator of where the market thinks this new product is heading and I will be tracking it!