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Factor exposure heterogeneity in green and brown stocks

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Listed:
  • Ardia, David
  • Bluteau, Keven
  • Lortie-Cloutier, Gabriel
  • Duy Tran, Thien

Abstract

Using the peer-exposure ratio, we explore the factor exposure heterogeneity in green and brown stocks. By looking at peer groups of S&P 500 index firms over 2009–2020 based on their greenhouse gas emission levels, we find that, on average, green stocks exhibit less factor exposure heterogeneity than brown stocks for most of the traditional equity factors but the value factor. Hence, investment managers shifting their investments from brown stocks to green stocks have less room to differentiate themselves regarding their factor exposures. Finally, we find that factor exposure heterogeneity has increased for green stocks compared to earlier periods.

Suggested Citation

  • Ardia, David & Bluteau, Keven & Lortie-Cloutier, Gabriel & Duy Tran, Thien, 2023. "Factor exposure heterogeneity in green and brown stocks," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002726
    DOI: 10.1016/j.frl.2023.103900
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    References listed on IDEAS

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    1. Ardia, David & Boudt, Kris, 2018. "The peer performance ratios of hedge funds," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 351-368.
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    More about this item

    Keywords

    Greenhouse gas emissions (GHG); Climate finance; Carbon finance; Peer performance; Factor exposure;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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