Hedging Climate Change News-Reference-Cited by-同舟云学术

Hedging Climate Change News

Published:2020-02-14 Issue:3 Volume:33 Page:1184-1216
ISSN:0893-9454
Container-title:The Review of Financial Studies
language:en
Short-container-title:

Author:

Engle Robert F¹,Giglio Stefano²,Kelly Bryan³,Lee Heebum⁴,Stroebel Johannes⁵

Affiliation:

1. NYU Stern and NBER

2. Yale University, NBER, and CEPR

3. Yale University, AQR Capital Management, and NBER

4. NYU Stern

5. NYU Stern, NBER, and CEPR

Abstract

Abstract We propose and implement a procedure to dynamically hedge climate change risk. We extract innovations from climate news series that we construct through textual analysis of newspapers. We then use a mimicking portfolio approach to build climate change hedge portfolios. We discipline the exercise by using third-party ESG scores of firms to model their climate risk exposures. We show that this approach yields parsimonious and industry-balanced portfolios that perform well in hedging innovations in climate news both in sample and out of sample. We discuss multiple directions for future research on financial approaches to managing climate risk.

Publisher

Oxford University Press (OUP)

Subject

Economics and Econometrics,Finance,Accounting

Link

http://academic.oup.com/rfs/article-pdf/33/3/1184/32449246/hhz072.pdf

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3. Does Climate Change Affect Real Estate Prices? Only If You Believe in it

4. Mimicking portfolios, economic risk premia, and tests of multi-beta models;Balduzzi,;Journal of Business and Economic Statistics,2008

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