Disaster on the horizon: The price effect of sea level rise

Asaf Bernstein, Matthew T. Gustafson and Ryan Lewis

Journal of Financial Economics, 2019, vol. 134, issue 2, 253-272

Abstract: Homes exposed to sea level rise (SLR) sell for approximately 7% less than observably equivalent unexposed properties equidistant from the beach. This discount has grown over time and is driven by sophisticated buyers and communities worried about global warming. Consistent with causal identification of long-horizon SLR costs, we find no relation between SLR exposure and rental rates and a 4% discount among properties not projected to be flooded for almost a century. Our findings contribute to the literature on the pricing of long-run risky cash flows and provide insights for optimal climate change policy.

Keywords: Climate change; Asset prices; Beliefs; Sea level rise; Real estate (search for similar items in EconPapers)
JEL-codes: G1 G14 Q54 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (203)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:134:y:2019:i:2:p:253-272

DOI: 10.1016/j.jfineco.2019.03.013

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