Abstract
Our study offers intriguing evidence on the much-debated idiosyncratic volatility (IdVol) puzzle from a climate risk perspective. Using a set of US-listed stocks from July 2010 to December 2019, our robust portfolio- and stock-level results reveal that the IdVol puzzle exists in both carbon-footprint-disclosing and non-disclosing stocks. Furthermore, investors do not perceive a significant difference in the IdVol puzzle between carbon-footprint-disclosing and non-disclosing stocks. However, the IdVol puzzle is concentrated in high-carbon-intensive stocks as far as those carbon-footprint-disclosing stocks are concerned, implying the combined effect of investor attention and ethical screening of stocks. Overall, our results substantiate the specific impact of climate-related risks on asset pricing decisions.
| Original language | English |
|---|---|
| Pages (from-to) | 3689-3708 |
| Number of pages | 20 |
| Journal | Applied Economics |
| Volume | 57 |
| Issue number | 27 |
| DOIs | |
| State | Published - 2025 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
Keywords
- Idiosyncratic volatility
- carbon disclosure
- carbon emissions intensity
- climate risk
- cross-sectional stock returns
ASJC Scopus subject areas
- Economics and Econometrics
