Greenhouse gas emissions and the stability of equity markets

David Y. Aharon, Ahmed S. Baig, Gady Jacoby and Zhenyu Wu

Journal of International Financial Markets, Institutions and Money, 2024, vol. 92, issue C

Abstract: We test the impact of GHG emissions on equity markets’ volatility. Our results confirm that CO2 and other greenhouse gases emissions such as agricultural nitrous oxide, and methane emissions are associated with increased stock market volatility. This relationship holds across different measures of volatility, emissions, and specifications using nearly 30 years’ worth of index-level data from stock exchanges across 50 countries. These findings lend support to the notion that carbon risk is priced into financial markets, and that green finance could promote more stable global equity markets in the future and thereby foster a more sustainable economic system.

Keywords: Carbon risk; Climate; Stock markets; Volatility; Emissions; Greenhouse gases (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:92:y:2024:i:c:s1042443124000180

DOI: 10.1016/j.intfin.2024.101952

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