Hedging Climate Change News

Medientyp: E-Book

Titel: Hedging Climate Change News

Beteiligte: Engle, Robert F, III. [Verfasser:in]; Giglio, Stefano [Sonstige Person, Familie und Körperschaft]; Kelly, Bryan T. [Sonstige Person, Familie und Körperschaft]; Lee, Heebum [Sonstige Person, Familie und Körperschaft]; Stroebel, Johannes [Sonstige Person, Familie und Körperschaft]

Körperschaft: National Bureau of Economic Research

Erschienen: Cambridge, Mass: National Bureau of Economic Research, 2019

Umfang: 1 Online-Ressource; illustrations (black and white)

Sprache: Englisch

DOI: 10.3386/w25734

Identifikator:

Reproduktionsnotiz: Hardcopy version available to institutional subscribers

Entstehung:

Anmerkungen: System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web

Beschreibung: We propose and implement a procedure to dynamically hedge climate change risk. To create our hedge target, we extract innovations from climate news series that we construct through textual analysis of high-dimensional data on newspaper coverage of climate change. We then use a mimicking portfolio approach based on a large panel of equity returns to build climate change hedge portfolios. We discipline the exercise by using third-party ESG scores of firms to model their climate risk exposures. We show that this approach yields parsimonious and industry-balanced portfolios that perform well in hedging innovations in climate news both in-sample and out-of-sample. The resulting hedge portfolios outperform alternative hedging strategies based primarily on industry tilts. We discuss multiple directions for future research on financial approaches to managing climate risk

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