Market expectations of a warming climate

• 成果类型: Article
• 署名作者: Schlenker, Wolfram; Taylor, Charles A.
• 署名单位: Columbia University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.08.019
• 发表日期: 2021
• 页码: 627-640
• 关键词: Market expectations; Belief formation; Weather markets; climate change

摘要

We compare prices of financial derivatives whose payouts are based on future weather outcomes to CMIP5 climate model predictions as well as observed weather station data across eight cities in the US from 2001 through 2020. Derivative prices respond both to short-term weather forecasts for the next two weeks and longer-term warming trends. We show that the long-term trends in derivative prices are comparable to station-level data and climate model output. The one exception is February in the northeastern US, where financial markets price in a polar vortex-induced cooling effect, a recent scientific finding that was not present in the older CMIP5 climate output. When looking at the spatial and temporal heterogeneity in trends, futures prices are more aligned with climate model out-put than observed weather station trends, suggesting that market participants closely align their expectations with scientific projections rather than recent observations. (c) 2021 Elsevier B.V. All rights reserved.