Riccardo Faini CEIS Webinars
Susana Martins (INET Oxford Martin School)

Geo-Climate, Geopolitics and the Geo-Volatility of Carbon-Intensive Asset Returns

Riccardo Faini CEIS Seminars

Friday, March 12, 2021 h. 16:00-17:00


CEIS Tor Vergata – TEAMS Webinar


Susana Martins (INET Oxford Martin School)

joint with D.F. Hendry

Anthropogenic climate change is due to burning fossil fuels and the consequent release of greenhouse gases. Given current technology, a transition towards low-carbon economies requires investments to shift away from carbon intensive assets. The systemic implications of disruptive technological progress on the prices of such assets are compounded by the geopolitical nature of transition risk. If investors are pricing climate change risk, prices of carbon intensive assets should all be responsive to climate change news. We propose a new modeling approach to analyze to what extent stock markets are reacting to climate change. For modeling the dynamics of volatility comovements at the global scale, we measure global carbon-intensive asset volatility using a novel model of multiplicative volatility factors. The model is applied to the daily stock prices of major oil and gas companies around the world. As the proxy for climate change perception, we use a climate change news index, which is constructed by applying text mining to newspaper content. By linking both sides, financial and climate change, results point out a significant effect of climate change volatility shocks on oil and gas stock return volatilities globally. Even though climate change shocks amplify the effect of crude oil volatility shocks on the oil and gas volatilities, they seem to have no direct effect on the volatility of the crude oil future.



Responsabile Scientifico
Marianna Brunetti, Furio Camillo Rosati

Barbara Piazzi

Media e social
Sito web organizzatore