Research On Climate-Related Financial Risk Premium Effect Based On Approximate Factor Structure

The special committee of the intergovernmental climate change predicts that extreme weather events will become more frequent and longer,and it will show stronger strength over time(IPCC,2014).Nordhaus(2019)believes that climate change is the "ultimate challenge" of economics,and the risk of financial assets has become more obvious.The first comprehensive report of the Green Financial System(NGFS,2019)released by the central bank and regulatory agency network said that "climate-related risks are the source of financial risks." Both climate-related physical and transformation risks can cause the value of financial assets through a variety of direct and indirect channels.In September 2020,President Xi Jinping was published at the 75 th UN General Assembly.China worked hard to achieve the maximum value of carbon dioxide emissions by 2030,and actively strived to achieve carbon neutrality before 2060.Asset pricing is the key to analyzing market investment.As the climate changes are becoming more intense,investors have gradually begun to pay attention to whether the stock yield contains climate-related risk premiums,so it is necessary to determine how to measure climate-related risk exposure.Zhang et al.(2018)divided the stocks of the Shenzhen Carbon Emissions Exchange based on the exemption of emissions.The study found that the stocks of different emission rights did not have a significant different carbon risk premium.Wen et al.(2019)uses a dual differential method to study the stocks of the Shenzhen Carbon Emissions Pilot Exchange.It is concluded that the establishment of a carbon emission right exchange has increased the carbon risk premium significantly.Whether my country’s stock market has a significant climate-related financial risk premium conclusion is not consistent,and the risk measurement indicators selected by literature are also inconsistent.Therefore,this article customizes new risk indicators to empirical research on my country’s climate risk premium effect provides new evidence.Climate risk is an abnormal phenomenon.It is an extra source of risks related to the financial market pricing,or it is or the unique characteristics of the company that can be eliminated by diversified and eliminated.This problem has not unified conclusions.This article shows the connection between the stock price and climate-related changes through the empirical proof of the factor model.The main research of climate-related financial risks(especially the risk of transformation)has a significant impact on Chinese stock income and estimates the risk premium.First of all,the real background and theoretical background,research significance,research content and thesis ideas of topic selection are introduced,which lists the innovation of this article.Then conduct a literature review.From the main analysis of climate-related financial risks and asset pricing models,it clarifies the meaning of climate-related risks,introduces the impact mechanism of one of them on the financial market,sort out domestic and foreign scholars at home and abroad to climate the climate at home and abroad The theoretical research progress and empirical research on the impact of risks on the impact of asset income explains the development process of classic asset pricing models and the concept of approximate factor structure.Finally,a brief commented on existing literature and put forward the significance of the topic selection in this article.In the empirical part of this article,the combination of environmental transparency and carbon emissions to establish a comprehensive index of the company’s environment.According to the indicators,the stock is divided into green stocks and brown stocks.Observe whether the custom green factors affect the stock yield.Use the Carhart model,FF trio model and CAPM model to return to various asset portfolios,and observe the price factors of neglecting by observing the intercept term.At the same time,the use of the theory of asset investment models containing green preferences can analyze whether green factors can affect asset yields.Next,we define the differences between the green transparent factor as the difference between the monthly return rate of the green and transparent investment portfolio and the brown investment portfolio.Using the linear factor model to use the Fama-Mac Beth two steps to regain the risk premium.It is estimated that the risk premium is estimated,and the evidence tests whether the greenness and transparency factors will affect the yield of China’s stock yields.This article selects all the Shanghai and Shenzhen A-shares from January 2012 to December 2019 as a research sample.Use Bloomberg Environment Discover scores(Bloomberg ESG disclosure scores)as an alternative indicator for the transparency of the company’s environment.Environmental performance indicators.The main conclusions of the study of this article are:(1)Regardless of the average yield or Sharp ratio,most of the time brown combination performance is better than the green combination.(2)The classic four-factor model has the pricing factor ignored,and the model of green transparent factor is better.(3)The risk premium of green transparent factor is negative and significant.Green transparent premium indicates that investors begin to attach importance to the company’s environmental performance and environmental transparency.When the energy consumption of enterprises is large,it needs to bear the cost of carbon emissions;when the company’s disclosure is low,it needs to bear additional risks.Therefore,investors have more requirements for brown stocks high yield.(4)The cross-sectional estimation value of the additional risk premium is always negative and significant.This component of risk premium captures market defects.For example,investors have different alternative expectations for stocks of different green transparency.The pricing includes additional expected information sets,and future prospects may play a relatively more important pricing role.(5)The estimation results of the two aspects of the two aspects of the scoring indicators on the risk premium do not depend on the weights of the two components of the two components given to green and transparency factor.The two components of environmental performance and environmental transparency are important.The green and transparent factors of the component will lose their pricing effect.The innovation points of this article are mainly reflected in:(1)Analysis of asset pricing theory into a new perspective of climate-related financial risks,re-identified green stocks from the perspective of low-carbon transformation and sustainable development,enriching the climate-related financial risk premium of the stock market the concept of.This article considers the importance of environmental performance and environmental transparency,and proposes two comprehensive scoring methods to consider.This article builds new green factors,using excess returns to measure the added value of green economic activities.(2)Using the climate-related risk premium of the stock market in the use of the approximate factor structure,the climate-related risk premium of the stock market has captured the additional risk premium,reflecting the impact of investors’ expected deviations on the stock income in the future,and more accurately estimated the climate Related risk premiums,supplemented and improved the asset pricing model of my country’s stock market.(3)This article quantifies the risk income of stock climate-related risks,and supplements the empirical inspection results of climate-related risk premiums in the Chinese stock market.China’s green stocks have a short time,the carbon emissions trading market has been established shorter,and the market rules are not obvious.This article combines the latest Chinese stock data to use the factor model containing new factors Related risk premium.There are still the following shortcomings in this article:(1)Due to the short disclosure time of China’s climate-related information,the carbon emission market is also under development.Therefore,there are certain limitations of samples and data selection,which will significantly affect the accuracy of empirical inspection.The short research period of this article is because the environmental information disclosure time is short.Due to the small carbon emissions data,the industry’s energy consumption is roughly representing environmental performance,and the indicator data is not accurate.(2)Due to the short sample period,the panel data is unbalanced,this article estimates that the risk premium is unchanged.The estimation of the time-changing risk premium in foreign countries has increased significantly in recent years.In recent years,it is estimated that a model of time-changing risk premiums is meaningful.