Dissecting Green Returns

Lubos Pastor, Robert Stambaugh and Lucian A. Taylor

No 28940, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Green assets delivered high returns in recent years. This performance reflects unexpectedly strong increases in environmental concerns, not high expected returns. German green bonds outperformed their higher-yielding non-green twins as the “greenium” widened, and U.S. green stocks outperformed brown as climate concerns strengthened. Despite that outperformance, we estimate lower expected returns for green stocks than for brown, consistent with theory. We estimate expected returns in two ways: ex ante, using implied costs of capital, and ex post, using realized returns purged of shocks from climate concerns and earnings. A theoretically motivated green factor explains much of value stocks' recent underperformance.

JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ene and nep-env
Note: AP EEE
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Citations: View citations in EconPapers (32)

Published as Ľuboš Pástor & Robert F. Stambaugh & Lucian A. Taylor, 2022. "Dissecting green returns," Journal of Financial Economics, vol 146(2), pages 403-424.

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