Climate change news sensitivity and mutual fund performance

Thang Ho

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: In the presence of rising concern about climate change that potentially affects risk and return of investors' portfolio companies, active investors might have dispersed climate change risk exposures. We compute mutual fund covariance with market-wide climate change news index and find that high (positive) climate news beta funds outperform low (negative) climate news beta funds by 0.24% per month on a risk-adjusted basis. High climate news beta funds tilt their holdings toward stocks with high potential to hedge against climate change news risk. In the cross section, such stocks yield higher excess returns, which are driven by greater pricing pressure and superior financial performance over our sample period.

Keywords: Mutual funds; Climate change; Fund-level climate news beta; Stock-level climate news beta; Returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 Q5 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002824

DOI: 10.1016/j.irfa.2022.102331

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