Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300683 
Year of Publication: 
2024
Series/Report no.: 
CFR Working Paper No. 24-06
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
This research investigates the influence of methodological choices in portfolio sorts on the size of the carbon premium. By analyzing more than 100,000 methodological paths, we find that variations in the construction of brown-minus-green portfolios create substantial non-standard errors. From 2009 to 2022, the mean carbon premium is -0.16% per month, with a non-standard error of 0.26%. Additionally, there is significant time-series variation in non-standard errors, which correlates with climate media attention. Controlling for unexpected changes in climate concerns substantially reduces methodology-induced uncertainty and helps explain the absence of a consistently positive carbon premium.
Subjects: 
non-standard errors
portfolio sorts
carbon premium
methodological uncertainty
JEL: 
C58
G11
G12
Q54
Document Type: 
Working Paper

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