We would like to invite all enthusiasts and finance researchers to February 2023 Kozminski University Finance Research Seminar! When? 28 February 2023, 17:00 PM (CET) Where? Microsoft Teams (Online) (MS Teams link will be sent following registration below)
Speaker: Chi-Yang Tsou ABSTRACT: This paper studies the asset pricing implications of industrial pollution. A long-short portfolio constructed from firms with high versus low toxic emission intensity within an industry generates an average annual return of 4.42%, which remains significant after controlling for risk factors. This pollution premium cannot be explained by existing systematic risks, investor preferences, market sentiment, political connections, or corporate governance. We propose and model a new systematic risk related to environmental policy uncertainty. We use the growth in environmental litigation penalties to measure regime change risk and find that it helps price the cross-section of emission portfolios' returns.
Chi-Yang Tsou is an Assistant Professor of Finance at the Division of Accounting and Finance, Alliance Manchester Business School, University of Manchester. His research interest is in the intersection of macroeconomics and asset pricing via the lens of corporate finance frictions.