Common volatility shocks in the global carbon transition
We propose a novel approach to measure the global effects of climate change news on financial markets. For that purpose, we first study the global common volatility of the oil and gas industry, and then project it onto climate-related shocks. We show that rising concerns about the energy transition make oil and gas share prices move at the global scale, controlling for shocks to the oil price, US and world stock markets. Despite the clear exposure of oil and gas companies to carbon transition risk, not all geoclimatic shocks are alike. The sign and magnitude of the impact differs across topics and themes of climate-related concerns. Regarding sentiment, climate change news tends to create turmoil only when the news is negative. Furthermore, the adverse effect is amplified by oil price movements but weakened by stock market shocks. Finally, our findings point out climate news materialises when it reaches the global scale, supporting the relevance of modelling geoclimatic volatility.
Date: 25 November 2022, 14:15 (Friday, 7th week, Michaelmas 2022)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A or https://zoom.us/j/94192839859?pwd=V0ZLZ1NtWEZwR0ZWRWUrWU5DY2tzUT09 Passcode: 984734
Speaker: Susana Campos-Martins (University of Oxford)
Organising department: Department of Economics
Part of: Nuffield Econometrics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Emma Heritage