Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171548
Authors: 
Ziegler, Andreas
Busch, Timo
Hoffmann, Volker H.
Year of Publication: 
2009
Series/Report no.: 
Economics Working Paper Series 09/105
Abstract: 
This paper examines the relationship between corporate activities to address climate change and stock performance. By separately analyzing the US and European stock markets for different sub-periods, we highlight the impact of the underlying climate policy regime. Methodologically, we compare risk-adjusted returns of stock portfolios comprising corporations that differ in their responses to climate change. In this respect, we apply the flexible Carhart fourfactor model besides the restricted one-factor model based on the Capital Asset Pricing Model (CAPM). While our portfolio analysis shows negative relationships over the entire observation period from 2001 to 2006, we find that a trading strategy, which bought stocks of corporations with a higher level of responses to climate change and sold stocks of corporations with a lower level, led to negative abnormal returns in regions and periods with less ambitious climate policy, but to positive abnormal returns in regions and periods with stringent climate policy.
Subjects: 
Climate change
Climate policy
Corporate environmental performance
Financial performance
Portfolio analysis
Asset pricing models
JEL: 
Q54
Q48
M14
G11
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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