TY - JOUR
T1 - Carbon Risk Factor Framework
AU - Gurvich, Alex
AU - Creamer, Germán G.
N1 - Publisher Copyright:
© 2022 Korea Disease Control and Prevention Agency.
PY - 2022/10
Y1 - 2022/10
N2 - This article provides new perspectives on carbon risk factors by using raw carbon footprint data, applying more accurate measurement of carbon footprint data, analyzing the global stock universe, utilizing a long data timeframe, and constructing three unique carbon factors. The research uses both Fama–French and Fama–MacBeth frameworks. All three carbon factors (carbon volume, carbon financial efficiency, and carbon operational efficiency) exhibit strong performance and high Sharpe ratios. There is no discernable return variation within the carbon volume factor along six formed portfolios. Both efficiency factors show a discernable higher performance for higher-carbon-efficiency companies with larger market capitalization. The regression analysis shows all three carbon factors exhibiting statistical significance individually or carbon volume with one of the efficiency factors. In conclusion, companies with relatively higher carbon volume or lower carbon efficiency have a positive risk premium.
AB - This article provides new perspectives on carbon risk factors by using raw carbon footprint data, applying more accurate measurement of carbon footprint data, analyzing the global stock universe, utilizing a long data timeframe, and constructing three unique carbon factors. The research uses both Fama–French and Fama–MacBeth frameworks. All three carbon factors (carbon volume, carbon financial efficiency, and carbon operational efficiency) exhibit strong performance and high Sharpe ratios. There is no discernable return variation within the carbon volume factor along six formed portfolios. Both efficiency factors show a discernable higher performance for higher-carbon-efficiency companies with larger market capitalization. The regression analysis shows all three carbon factors exhibiting statistical significance individually or carbon volume with one of the efficiency factors. In conclusion, companies with relatively higher carbon volume or lower carbon efficiency have a positive risk premium.
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U2 - 10.3905/jpm.2022.1.416
DO - 10.3905/jpm.2022.1.416
M3 - Article
AN - SCOPUS:85140303793
SN - 0095-4918
VL - 48
SP - 148
EP - 164
JO - Journal of Portfolio Management
JF - Journal of Portfolio Management
IS - 10
ER -