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Climate concerns and financial markets: an empirical analysis of emission intensities impact on stock returns
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Resumo(s)
This study examines the effects of pollution on stock prices. Following the portfolio sorting
methodology demonstrated in “The Pollution Premium” (Hsu, Li and Tsou 2023), five quantile
portfolios based on sector-specific emission intensities are established. The High-Minus-Low
emission intensity portfolio yields a significant negative annualized excess return of -3.24% for
the sample of European companies from 2006 to 2023. Consecutive asset pricing factor tests
and Fama-MacBeth regressions provide further evidence for the negative emission-return
relationship. The superior performance of companies with lower emission intensities indicates
that stock markets value information on greenhouse gas emissions and transitory risks.
Descrição
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Asset pricing Financial markets Stock returns Climate change Pollution Greenhouse gases