QUEEN’S BUSINESS SCHOOL FINANCE SEMINAR SERIES

Wednesday 5^th February

1pm

“Temperature Exposure and Green Revenues of Firms Around the World”

Faek Menla Ali

University of Sussex Business School

Abstract: This paper analyses the asset pricing implications of temperature anomalies using a global sample spanning from 2008 to 2022. We find that temperature beta is, on average, significantly negative, while exhibits substantial variation across industries. Consistent with our proposed theoretical model, this beta is primarily driven by the adverse impact of temperature anomalies on firms’ productivity, profitability and cash flows, and decreases as firms increase their percentage of green revenues. We additionally document that this beta affect the cross-section of stock returns globally. Stocks in the highest absolute temperature beta quintile generate up to 6.28% higher annualised risk-adjusted return than stocks in the lowest quintile. Thus, temperature beta-averse investors demand higher expected returns to hold stocks with relatively high temperature betas.

QBS Conference Hub, Seminar Room 01.012