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Climate change news sensitivity and mutual fund performance

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  • Ho, Thang

Abstract

In the presence of rising concern about climate change that potentially affects risk and return of investors' portfolio companies, active investors might have dispersed climate change risk exposures. We compute mutual fund covariance with market-wide climate change news index and find that high (positive) climate news beta funds outperform low (negative) climate news beta funds by 0.24% per month on a risk-adjusted basis. High climate news beta funds tilt their holdings toward stocks with high potential to hedge against climate change news risk. In the cross section, such stocks yield higher excess returns, which are driven by greater pricing pressure and superior financial performance over our sample period.

Suggested Citation

  • Ho, Thang, 2022. "Climate change news sensitivity and mutual fund performance," International Review of Financial Analysis, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002824
    DOI: 10.1016/j.irfa.2022.102331
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    More about this item

    Keywords

    Mutual funds; Climate change; Fund-level climate news beta; Stock-level climate news beta; Returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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