Thursday 23 November – from 1:15 pm to 2:15 pm

Do investors care about carbon-risk?
A reappraisal.

Abraham Lioui, Head of the Finance, Economics & Data Science department at EDHEC

Abstract:

Carbon emissions data transformation (raw emissions vs. carbon intensity) led to the carbon pricing puzzle, i.e. mixed evidence about the existence of a carbon-risk premium. Dissecting Fama and MacBeth (1973) methodology, the most widely used, helps relate the puzzle to the features of the portfolio underlying Fama and MacBeth (1973) carbon factor. The latter is a (de)levered Emissions-Weighted carbon factor. The Emissions-Weighted factor yields the same diversification benefits as the Fama and MacBeth (1973) factor. Since the weights of each of its legs sum to one, it is substantially less sensitive to carbon data transformation than the Fama and MacBeth (1973) factor. Based on the Emissions-Weighted carbon factor, investors care about carbon-risk much more than initially thought.

Registration, please contact robin@em-lyon.com

Room 235 – Ecully campus