Paper: SSRN 2930897

Abstract

We investigate carbon risk in global equity prices. We develop a measure of carbon risk using industry standard databases and study return differences between b

Complexity vs Empirical Score

  • Math Complexity: 4.0/10
  • Empirical Rigor: 6.5/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper uses standard asset pricing regressions and portfolio sorts but lacks heavy mathematical derivations; however, it demonstrates strong empirical rigor through the use of multiple industry-standard ESG databases, a constructed factor-mimicking portfolio (BMG), and extensive backtesting across regions and time periods.

Research Flowchart

  flowchart TD
  A["Research Goal<br>How does carbon risk affect<br>global equity returns?"] --> B["Data Collection<br>Refinitiv ESG, CRSP, Compustat"]
  B --> C["Methodology<br>Portfolio Formation &<br>Regression Analysis"]
  C --> D["Computation<br>Carbon Risk Score &<br>Alpha Calculation"]
  D --> E["Key Finding 1<br>High-carbon firms earn<br>significant positive returns"]
  D --> F["Key Finding 2<br>Carbon risk is priced<br>in global markets"]