Publication Type
Working Paper
Version
publishedVersion
Publication Date
8-2021
Abstract
We examine whether fund managers overestimate carbon risk when they are exposed to local air pollution. We find that air pollution causes managers to underweight stocks of high-emission firms. The effects are stronger for less salient scopes of carbon emissions, among managers located in pro-environmental states, and among those likely to be surprised by air pollution—consistent with the idea that managers revise their beliefs about climate-transition risk following their exposure to air pollution. Carbon-intensive stocks sold by managers who are exposed to air pollution subsequently outperform stocks that they buy, suggesting that such underweighting is costly to fund investors.
Keywords
Air Quality Index, Mutual Funds, Carbon Divestment, Belief Revision
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
69
Publisher
SSRN
Citation
HUYNH, Thanh; LI, Frank Weikai; and XIA, Ying Xia.
Something in the air: Does air pollution affect fund managers’ carbon divestment?. (2021). 1-69.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6815
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.