Abstract
We provide first-time evidence on whether market-wide physical or transition climate risks are priced in U.S. stocks. Textual and narrative analysis of Reuters climate-change news over January 1st 2000 – December 31st 2018 uncovers four novel risk measures related to natural disasters, global warming, international summits, and U.S. climate policy, respectively. Only the climate-policy factor is priced, especially post-2012. The documented risk premium is consistent with investors hedging the imminent transition risks from government intervention, rather than the direct risks from climate change itself.
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