24/07/2026 - 14:30 - ISBA D.119 -
(City University of Hong Kong)
will give a presentation on :
Abstract:
Competing asset-pricing theories offer divergent views on carbon risk: risk-based models predict higher returns for carbon-intensive firms, whereas preference-based models imply outperformance of low-carbon assets due to unexpected demand shocks. We develop a Carbon Risk Dynamic Indicator (CARDI) to capture systemic, time-varying carbon risk by predicting relative tail-event measures between high- and low-carbon firms. Our framework shows that rising CARDI strengthens green-asset demand and weakens the traditional high-risk–high-return pattern. Using Chinese daily market data from 2014–2025, we show that CARDI forecasts a time-varying low-carbon premium, providing a tractable tool for incorporating climate-related financial risks into asset-pricing and portfolio decisions.