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Climate news betas and risk premia

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  • Lalwani, Vaibhav

Abstract

We investigate whether climate risk, as captured by news-based betas, is priced in U.S. and Chinese stocks. Crucially, we measure how sensitive this pricing is to common methodological variations. We estimate 144 distinct climate news betas for each stock by varying the climate news index, data frequency (daily vs. monthly), estimation window length, climate index transformation, and control variables. Our results reveal substantial sampling as well as methodological variation in beta estimates. Only about 6%–10% of the long-short portfolios based on climate betas yield statistically significant premia, either positive or negative. After correcting for multiple testing, none remain significant. These findings highlight that methodological choices significantly affect both climate betas and climate risk premia, underscoring the need for caution in interpreting the results of prior studies.

Suggested Citation

  • Lalwani, Vaibhav, 2026. "Climate news betas and risk premia," Energy Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:eneeco:v:157:y:2026:i:c:s0140988326001684
    DOI: 10.1016/j.eneco.2026.109289
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    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

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