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Climate change news sensitivity and expected stock returns: Evidence from China

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  • Lu, Hengzhen
  • Wang, Xinran

Abstract

Investors are increasingly looking to diversify their exposure to climate-related risks as climate change becomes a major concern. In the Chinese A-share market, we use the climate change news index to calculate stock covariance. Empirical results show that stocks with a positive climate news beta yield significantly higher excess returns, indicating advantages in ESG performance and predictive power for companies’ future fundamentals. Institutional investors are increasingly interested in these companies due to their exceptional ability to hedge climate risks. Our work provides important insights into green practices and sustainable investment by highlighting the relationship between investor behavior and climate risk management.

Suggested Citation

  • Lu, Hengzhen & Wang, Xinran, 2025. "Climate change news sensitivity and expected stock returns: Evidence from China," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007561
    DOI: 10.1016/j.frl.2025.107497
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    References listed on IDEAS

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    Cited by:

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