Factor exposure heterogeneity in green and brown stocks

David Ardia, Keven Bluteau, Gabriel Lortie-Cloutier and Thien Duy Tran

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: Using the peer-exposure ratio, we explore the factor exposure heterogeneity in green and brown stocks. By looking at peer groups of S&P 500 index firms over 2009–2020 based on their greenhouse gas emission levels, we find that, on average, green stocks exhibit less factor exposure heterogeneity than brown stocks for most of the traditional equity factors but the value factor. Hence, investment managers shifting their investments from brown stocks to green stocks have less room to differentiate themselves regarding their factor exposures. Finally, we find that factor exposure heterogeneity has increased for green stocks compared to earlier periods.

Keywords: Greenhouse gas emissions (GHG); Climate finance; Carbon finance; Peer performance; Factor exposure (search for similar items in EconPapers)
JEL-codes: G11 G18 G24 Q01 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Factor Exposure Heterogeneity in Green and Brown Stocks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002726

DOI: 10.1016/j.frl.2023.103900

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