Hurricane Risk and Asset Prices

Item Type Conference or Workshop Item (Paper)
Abstract We examine hurricane exposure as a systematic risk factor in the US stock market. Motivated by a consumption-based asset pricing model with heterogeneous agents, we derive a necessary and sufficient condition for a hurricane risk premium in the cross-section of stock returns. Empirically, we find that – in the period from 1995 to 2020 – stocks that react negatively to aggregate hurricane losses outperform stocks that react positively by almost 9% p.a. The hurricane premium is not explained by standard asset pricing risk factors nor stock characteristics. Our results emphasize the importance of climate risk for firms’ cost of capital.
Authors Braun, Alexander; Braun, Julia & Weigert, Florian
Language English
Keywords Hurricane Risk, Consumption-Based Asset Pricing with Heterogeneous Agents, Empirical Asset Pricing, Climate Change
Subjects finance
HSG Classification contribution to scientific community
Date September 2022
Event Title EGRIE 2022
Event Location Vienna
Event Dates 18.09.2022-22.09.2022
Contact Email Address
Depositing User M.A. Julia Braun
Date Deposited 08 Nov 2022 10:28
Last Modified 27 Mar 2023 00:27


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Braun, Alexander; Braun, Julia & Weigert, Florian: Hurricane Risk and Asset Prices. 2022. - EGRIE 2022. - Vienna.

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