
In this working paper entitled "Time-varying Environmental Betas and Latent Green Factors", the authors study whether the US stock market is pricing exposures to clima ...
In this working paper entitled "Time-varying Environmental Betas and Latent Green Factors", the authors study whether the US stock market is pricing exposures to climate risks through the lense of a latent linear factor model with time-varying betas estimable by an extension
of the instrumented principal component analysis (IPCA) of Kelly, Pruitt, and Su (2019).
In their specification, the factor loadings are allowed to be functions of both “financial” and environmental (“green”) company specific characteristics, such as ESG ratings and carbon intensity. They extend the original IPCA model to allow for the presence of different sets of orthogonal factors whose loadings are driven by only one of the two types of characteristics.
Their extension allows
Type : | EDHEC Publication |
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Date : | 19/04/2023 |