What Do Financial Markets Reveal about Global Warming?
AbstractFinancial market information can provide an objective assessment of expected losses due to global warming. In a Merton-type asset pricing model, with asset prices affected by changes in investment opportunities caused by global warming, the risk premium is significantly negative and growing over time, loadings for most assets are negative, and asset portfolios in more vulnerable industries have stronger negative loadings on the global warming factor. Required returns are 0.11 percent higher due to global warming, implying a present value loss of 4.18 percent of wealth. These costs complement and exceed previous estimates of the cost of global warming.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, West Virginia University in its series Working Papers with number 09-04.
Length: 42 pages
Date of creation: 2009
Date of revision:
Asset Pricing; Global Warming; Cost of Capital; Tracking Portfolios.;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-CFN-2009-12-19 (Corporate Finance)
- NEP-ENE-2009-12-19 (Energy Economics)
- NEP-ENV-2009-12-19 (Environmental Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eran Guse) The email address of this maintainer does not seem to be valid anymore. Please ask Eran Guse to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.