Hedging Climate Change News

• 成果类型: Article
• 署名作者: Engle, Robert F.; Giglio, Stefano; Kelly, Bryan; Lee, Heebum; Stroebel, Johannes
• 署名单位: National Bureau of Economic Research; Yale University; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz072
• 发表日期: 2020
• 页码: 1184
• 关键词: MIMICKING PORTFOLIOS; tests; RISK

摘要

We propose and implement a procedure to dynamically hedge climate change risk. We extract innovations from climate news series that we construct through textual analysis of newspapers. We then use a mimicking portfolio approach 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. We discuss multiple directions for future research on financial approaches to managing climate risk.