Do investors care about carbon risk? Bolton, Patrick; Kacperczyk, Marcin
Journal of financial economics,
November 2021, 2021-11-00, 20211101, Letnik:
142, Številka:
2
Journal Article
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We study whether carbon emissions affect the cross-section of US stock returns. We find that stocks of firms with higher total carbon dioxide emissions (and changes in emissions) earn higher returns, ...controlling for size, book-to-market, and other return predictors. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors. We also find that institutional investors implement exclusionary screening based on direct emission intensity (the ratio of total emissions to sales) in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.
Using the value that a mutual fund extracts from capital markets as the measure of skill, we find that the average mutual fund has used this skill to generate about $3.2 million per year. Large ...cross-sectional differences in skill persist for as long as ten years. Investors recognize this skill and reward it by investing more capital with better funds. Better funds earn higher aggregate fees, and a strong positive correlation exists between current compensation and future performance. The cross-sectional distribution of managerial skill is predominantly reflected in the cross-sectional distribution of fund size, not gross alpha.
Anticompetitive Effects of Common Ownership AZAR, JOSÉ; SCHMALZ, MARTIN C.; TECU, ISABEL
The Journal of finance (New York),
08/2018, Letnik:
73, Številka:
4
Journal Article
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Odprti dostop
Many natural competitors are jointly held by a small set of large institutional investors. In the U.S. airline industry, taking common ownership into account implies increases in market concentration ...that are 10 times larger than what is "presumed likely to enhance market power" by antitrust authorities.¹ Within-route changes in common ownership concentration robustly correlate with route-level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost—reduced product market competition—accompanies the private benefits of diversification and good governance.
This study uses two distinct quasi-natural experiments to examine the effect of institutional shareholders on corporate social responsibility (CSR). We first find that an exogenous increase in ...institutional holding caused by Russell Index reconstitutions improves portfolio firms’ CSR performance. We then find that firms have lower CSR ratings when shareholders are distracted due to exogenous shocks. Moreover, the effect of institutional ownership is stronger in CSR categories that are financially material. Furthermore, we show that institutional shareholders influence CSR through CSR-related proposals. Overall, our results suggest that institutional shareholders can generate real social impact.
To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and ...social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.
We survey institutional investors to better understand their role in the corporate governance of firms. Consistent with a number of theories, we document widespread behind-the-scenes intervention as ...well as governance-motivated exit. These governance mechanisms are viewed as complementary devices, with intervention typically occurring prior to a potential exit. We further find that long-term investors and investors that are less concerned about stock liquidity intervene more intensively. Finally, we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions.
Do ETFs Increase Volatility? BEN-DAVID, ITZHAK; FRANZONI, FRANCESCO; MOUSSAWI, RABIH
The Journal of finance (New York),
December 2018, Letnik:
73, Številka:
6
Journal Article
Recenzirano
Odprti dostop
Due to their low trading costs, exchange-traded funds (ETFs) are a potential catalyst for short-horizon liquidity traders. The liquidity shocks can propagate to the under-lying securities through the ...arbitrage channel, and ETFs may increase the nonfundamental volatility of the securities in their baskets. We exploit exogenous changes in index membership and find that stocks with higher ETF ownership display significantly higher volatility. ETF ownership increases the negative autocorrelation in stock prices. The increase in volatility appears to introduce undiversifiable risk in prices because stocks with high ETF ownership earn a significant risk premium of up to 56 basis points monthly.
This paper challenges the view that foreign investors lead firms to adopt a short-term orientation and forgo long-term investment. Using a comprehensive sample of publicly listed firms in 30 ...countries over the period 2001–2010, we find instead that greater foreign institutional ownership fosters long-term investment in tangible, intangible, and human capital. Foreign institutional ownership also leads to significant increases in innovation output. We identify these effects by exploiting the exogenous variation in foreign institutional ownership that follows the addition of a stock to the MSCI indexes. Our results suggest that foreign institutions exert a disciplinary role on entrenched corporate insiders worldwide.
This study examines the role of gold as a hedge or safe-haven asset in different phases of the COVID-19 pandemic crisis, corresponding to the timing of fiscal and monetary stimuli to support the ...weakened economy. Using high-frequency data, the results show that gold served as a safe-haven asset for stock markets during Phase I (December 31, 2019–March 16, 2020) of the pandemic. However, gold lost its safe-haven role during Phase II (March 17−April 24, 2020). The optimal weights of gold in S&P 500, Euro Stoxx 50, Nikkei 225, and WTI crude oil portfolios significantly increased during Phase II, suggesting that investors expanded investment in gold as a ‘flight-to-safety asset’ during the crisis. Further, hedging costs increased significantly during Phase II. These findings provide insight for individual and institutional investors and guidance to policymakers, regulators, and media on how gold evolved as a hedge and safe-haven asset in different phases of the pandemic.
•We study the role of gold in the COVID–19 crisis.•Gold acts as safe haven asset during Phase I (31 Dec 2019–16 Mar 2020).•Gold loses the safe haven status during Phase II (17 Mar −24 April 2020).•Investors increase their investment in gold during Phase II as a ‘flight-to-safety asset’.•Hedging cost increases during Phase II.
The use of financial instruments is a relatively small phenomenon in the context of the current Romanian economy. However, we can see an increase in the use of financial instruments to finance the ...current and future activities of entities in the national economy. The problems raised by a relatively difficult access of economic entities to financing resources - bank lending, in the set of restrictions generated by the epidemiological context, are a stimulating factor for increasing the use of financial instruments. In this paper, in a simplified manner, we try to highlight some problems that have arisen in the context of the implementation of financial instruments in the accounting of Romanian entities. The applicability of financial instruments to the needs of companies is a segment in which the legislature must intervene with appropriate regulations, necessary for efficient operation. Providing technical support, software applications is an underdeveloped segment today.
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