 Is the Korean green premium in equilibrium?Yunsung Eom, Young Dae Kang and Wook Sohn International Review of Economics & Finance, 2024, vol. 92, issue C, 245-260 Abstract: This study examines the Green premium in the Korean stock market using the two-factor equilibrium model developed by Pástor, Stambaugh, and Taylor (2021), which consists of the Market and Green factors. From 2012 to 2020, the Green factor premium in the Korean stock market is estimated to be negative, with a monthly average of −0.23%. This finding aligns with the expectations of the equilibrium model, which suggests a negative Green premium (indicating low Green and high Brown) due to the investors’ preference for green investments and the demand for hedging against climate risk. The negative sign of the Green factor premium holds robustly across different methods and data employed in the analyses. However, there has been a recent weakening in the magnitude of the negative Green factor premium. This suggests a potential impact of positive ESG shocks on the Korean stock market, similar to the case observed in the US stock market, where a positive realized Green premium was identified by Pástor, Stambaugh, and Taylor (2022). Keywords: Sustainable investing equilibrium model; Green factor premium; Green beta; Korean stock market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:92:y:2024:i:c:p:245-260 DOI: 10.1016/j.iref.2024.02.018 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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