A0888
Title: Climate regulatory risk and technological opportunities
Authors: Helene Mathurin - ESSEC Business School (France) [presenting]
Abstract: A consumption-based asset pricing model is introduced with long-run risk in which environmental policies stimulate research and development efforts, thereby increasing the probability of breakthrough green innovation. This model features two separate but correlated premia for transition risks: a premium for regulation risk and a premium for technological innovation. The model is calibrated, and the complex interaction between these two premia is illustrated. Finally, the model's predictions are tested by building new measures of these premia, which use press releases to proxy firms' exposure to innovation and to regulatory risk.
