Does Climate Change News Matter?

Jovelyn Ferrer (), Juliana Malagon and Enrique ter Horst
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Jovelyn Ferrer: School of Management, Universidad de Los Andes, Bogotá 111711, Colombia
Juliana Malagon: School of Management, Universidad de Los Andes, Bogotá 111711, Colombia
Enrique ter Horst: School of Management, Universidad de Los Andes, Bogotá 111711, Colombia

Sustainability, 2023, vol. 15, issue 18, 1-16

Abstract: We explore the importance of climate change as a news topic and examine the relationship between climate change news and financial returns using a large news database that consists of more than 4 million news stories. We use multinomial inverse regression—a Bayesian approach capable of handling the multi-dimensionality of our data—to translate news into a quantifiable input. We also build a climate change dictionary from different sources to identify climate change related words. We find that climate change is a persistent topic in our news universe, which indicates that it is a relevant news topic. This relevance is supported by the non-zero contribution of climate change related trigrams (CCRTs) in the constructed news index. However, our sample does not show an increasing trend of the relative daily presence of CCRTs, which signals that the news are unlikely the source that furthers the perceived increasing awareness of climate change. Lastly, we determine the salient CCRTs present during good and bad days of the market. This result highlights the presence in the news of topics related to fuel and energy, emission, climate change, disaster, and fiscal policy.

Keywords: climate change; climate change news; financial returns; market returns; multinomial inverse regression; text analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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