Essays in Environmental Finance

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dc.contributor.advisor Berkman, H en
dc.contributor.advisor Geertsema, P en Tirodkar, Mihir en 2020-05-14T02:51:33Z en 2020 en
dc.identifier.uri en
dc.description.abstract This thesis comprises of three empirical studies that examine separate interactions between environmental variables and financial markets. Set within a U.S. backdrop, the studies integrate and analyse relationships between asset pricing, corporate finance, behavioural finance, and environmental economics. The first chapter examines whether low frequency temperature risk, a component of climate risk, is a priced risk factor in equity markets. Rising temperatures are associated with states of poor consumption and potential disasters; consumption-based asset pricing theories suggest investors prefer investments which pay off in these poor states. I estimate low frequency temperature shocks and employ them in asset pricing tests. Results provide no evidence of a low frequency temperature risk premium in U.S. equity markets. I discuss possible reasons as to why results may diverge from the asset pricing theory. The second chapter tests whether institutional investors are reluctant to own polluter ‘sin’ stocks. I hypothesise that sensitivity to social norms restricts institutional ownership of polluters. Using toxic emissions data from the Toxic Release Inventory, I find results that are consistent with the hypothesis. Furthermore, I find that institutions with long-term investment horizons and exposure to public scrutiny display a stronger reluctance to own polluters. I find no evidence of positive abnormal performance of polluter stocks, as hypothesised by the ‘shunned-stock’ theory. The final chapter examines security analyst earnings forecasts for polluter firms. Polluters are negatively exposed to increased regulations and consumer backlash; however, security analysts may misestimate associated costs. Tests show that analysts generate systematically pessimistic forecasts for polluter firm earnings on average; behavioural theories suggest that this pessimism is due to cognitive constraints. I also find evidence of persistent analyst bias for polluters, consistent with the conservatism bias theory. Results provide no evidence of polluter abnormal returns resulting from positive earnings surprises around earnings announcements. en
dc.publisher ResearchSpace@Auckland en
dc.relation.ispartof PhD Thesis - University of Auckland en
dc.relation.isreferencedby UoA en
dc.rights Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated. Previously published items are made available in accordance with the copyright policy of the publisher. en
dc.rights.uri en
dc.rights.uri en
dc.title Essays in Environmental Finance en
dc.type Thesis en Finance en The University of Auckland en Doctoral en PhD en
dc.rights.holder Copyright: The author en
dc.rights.accessrights en
pubs.elements-id 801802 en
pubs.record-created-at-source-date 2020-05-14 en

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