Non-standard errors in carbon premia

Victor Beyer and Michael Tobias Bauckloh

No 24-06, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This research investigates the influence of methodological choices in portfolio sorts on the size of the carbon premium. By analyzing more than 100,000 methodological paths, we find that variations in the construction of brown-minus-green portfolios create substantial non-standard errors. From 2009 to 2022, the mean carbon premium is -0.16% per month, with a non-standard error of 0.26%. Additionally, there is significant time-series variation in non-standard errors, which correlates with climate media attention. Controlling for unexpected changes in climate concerns substantially reduces methodology-induced uncertainty and helps explain the absence of a consistently positive carbon premium.

Keywords: non-standard errors; portfolio sorts; carbon premium; methodological uncertainty (search for similar items in EconPapers)
JEL-codes: C58 G11 G12 Q54 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:300683

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