Dissecting climate risks: Are they reflected in stock prices?

Renato Faccini, Rastin Matin and George Skiadopoulos

Journal of Banking & Finance, 2023, vol. 155, issue C

Abstract: We provide first-time evidence on whether market-wide physical or transition climate risks are priced in U.S. stocks. Textual and narrative analysis of Reuters climate-change news over January 1st 2000 – December 31st 2018 uncovers four novel risk measures related to natural disasters, global warming, international summits, and U.S. climate policy, respectively. Only the climate-policy factor is priced, especially post-2012. The documented risk premium is consistent with investors hedging the imminent transition risks from government intervention, rather than the direct risks from climate change itself.

Keywords: Physical risks; Transition risks; Latent Dirichlet allocation; Cross-section of stock returns; Textual analysis (search for similar items in EconPapers)
JEL-codes: C63 E58 G12 G18 Q5 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S037842662300153X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:155:y:2023:i:c:s037842662300153x

DOI: 10.1016/j.jbankfin.2023.106948

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().