Climate Transition Risk and the Impact on Green Bonds

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A simple but powerful measure of market efficiency

We construct a simple measure to quantify the level of market efficiency. We apply this measure to investigate the level of market efficiency and analyze its variation over time. The main contribution of the new measure is that it makes it easy to compare market efficiency across assets, time, regions, and data frequencies. We find that markets are often efficient, but can be significantly inefficient over longer periods. Our empirical results indicates that in many periods of major economic events, financial markets becomes less efficient. This corroborates earlier results on market efficiency, and simplifies interpretation and comparisons.publishedVersionUnit Licence Agreemen

Econometric Measurement of Earth\u27s Transient Climate Sensitivity

How sensitive is Earth’s climate to a given increase in atmospheric greenhouse gas (GHG) concentrations? This long-standing and fundamental question in climate science was recently analyzed by dynamic panel data methods using extensive spatiotemporal data of global surface temperatures, solar radiation, and GHG concentrations over the last half century to 2010 (Storelvmo et al, 2016). These methods revealed that atmospheric aerosol effects masked approximately one-third of the continental warming due to increasing GHG concentrations over this period, thereby implying greater climate sensitivity to GHGs than previously thought. The present study provides asymptotic theory justifying the use of these methods when there are stochastic process trends in both the global forcing variables, such as GHGs, and station-level trend effects from such sources as local aerosol pollutants. These asymptotics validate con dence interval construction for econometric measures of Earth’s transient climate sensitivity. The methods are applied to observational data and to data generated from three leading global climate models (GCMs) that are sampled spatio-temporally in the same way as the empirical observations. The fi ndings indicate that estimates of transient climate sensitivity produced by these GCMs lie within empirically determined con dence limits but that the GCMs uniformly underestimate the effects of aerosol induced dimming. The analysis shows the potential of econometric methods to calibrate GCM performance against observational data and to reveal the respective sensitivity parameters (GHG and non-GHG related) governing GCM temperature trends

Trade volume affects bitcoin energy consumption and carbon footprint

The environmental sustainability of bitcoin is making waves in the empirical literature, yet, no study has thus far examined the financial determinants of bitcoin energy consumption and carbon footprint. Here, we use novel estimation methods comprising dynamic ARDL simulations and general-to-specific VAR to examine steady-state effects, cumulative impulse-response, and counterfactual shocks of bitcoin trade volume on bitcoin energy bitcoin carbon footprint to ensure genuine causal inferences. We observed an increase in bitcoin trade volume spur both carbon and energy footprint by 24% in the long-run, whereas a dynamic shock in trade volume escalates bitcoin energy and carbon footprint by 46.54%

Reading religion in Norwegian textbooks: are individual religions ideas or people?

Different religions are treated in different ways in Norwegian sixth form textbooks. We carried out an exhaustive content analysis of the chapters devoted to individual religions in textbooks for the Religion and Ethics course currently available in Norway, using rigorous indicators to code each word, image and question according to whether they were treated the religion as a set of ideas or a group of people. After adjusting for trends in the different kinds of data (word, image, question), we found that Buddhism and Christianity receive significantly more attention for their ideas than Hinduism, Islam and Judaism, which are treated more as people. This difference cannot be explained by the national syllabus or the particularities of the individual religions. The asymmetry also has implications for the pupils’ academic, moral and pedagogical agency for which teachers play a critical role in compensating.acceptedVersio

Essays in asset allocation

This thesis consists of two chapters. In the first chapter, I analyze the optimal allocation of wealth to cash, bonds, and stocks when the interest rate is stochastic and the stock index has a time-varying mean. I find that, under certain economic conditions, the investor may optimally increase investments in stocks and bonds at the same time, which is due to the dynamic trading policies and the correlation between the asset classes. I also find that in different economic regimes, short-term investors have very different investment policies than long-term investors. Thus, dynamic asset allocation with nonzero bond-stock correlation helps explain why, during extreme market conditions such as the recent financial crisis, some investors sold all types of assets short, whereas other investors considered it an unprecedented buying opportunity. In the second chapter, I study the impact of time-varying bid-ask spreads in the optimal portfolio allocation. Relying on transaction- level data for a broad panel of bonds from 2004 through 2012, I find that the estimated bid-ask spread of bonds are highly time-varying and mean-reverting. The spread estimator peaks in 2008 during the credit market crisis and has a substantial volatility in 2011 and 2012 during the sovereign debt crisis. I further show that the hedge demand for liquidity risk for finite horizon investors may be as much as 50 percent larger than the demand for hedging interest rate risk

The MAX Effect in an Oil Exporting Country: The Case of Norway

This paper assesses the effects of investors’ lottery-seeking behavior on expected returns in the Norwegian equity market, a relatively small equity market dominated by the energy industry. We use the MAX factor defined as maximum daily return over the previous month as the proxy of investors’ preference for lottery-like stocks. Despite evidence from recent literature that MAX has a negative relationship with the expected returns in other developed European markets, we find that the relationship is generally insignificant in Norway; however, it becomes more nuanced when we control for the state of the oil market. The dominance of firms related to the oil industry, which have experienced tremendous growth over the last couple of decades, masks the effect to a large extent. Conditional regressions show that the MAX effect is only significant in the Norwegian stock market when the oil market is in the bearish state

Climate change events and stock market returns

publishedVersio

The MAX Effect in an Oil Exporting Country: The Case of Norway

This paper assesses the effects of investors’ lottery-seeking behavior on expected returns in the Norwegian equity market, a relatively small equity market dominated by the energy industry. We use the MAX factor defined as maximum daily return over the previous month as the proxy of investors’ preference for lottery-like stocks. Despite evidence from recent literature that MAX has a negative relationship with the expected returns in other developed European markets, we find that the relationship is generally insignificant in Norway; however, it becomes more nuanced when we control for the state of the oil market. The dominance of firms related to the oil industry, which have experienced tremendous growth over the last couple of decades, masks the effect to a large extent. Conditional regressions show that the MAX effect is only significant in the Norwegian stock market when the oil market is in the bearish state