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<p>This paper investigates the cross-sectional relation between climate policy uncertainty and expected stock returns in China. We quantify climate policy uncertainty in China based on news from two leading mainland newspapers: the Renmin Daily and the Guangming Daily. Using the sample of Chinese A-share manufacturing companies from 2008 to 2019, we find that stocks with lower climate policy uncertainty beta generate about 4% annualized return compared to stocks with higher climate policy uncertainty beta. Specifically, our results support the ICAPM of Merton (Econom J Econom Soc 41:867–887, 1973), which indicates that uncertainty-averse investors demand extra compensation to hold stocks with lower climate policy uncertainty beta and they are willing to pay high prices and accept lower future returns for stocks with higher climate policy uncertainty beta.</p>

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Is climate policy uncertainty priced in China?

  • 期刊论文

  • 发表日期：

    2025年5月4日

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  • Tao Huang,
  • Zeyu Sun,
  • Zhe Zhao

摘要

This paper investigates the cross-sectional relation between climate policy uncertainty and expected stock returns in China. We quantify climate policy uncertainty in China based on news from two leading mainland newspapers: the Renmin Daily and the Guangming Daily. Using the sample of Chinese A-share manufacturing companies from 2008 to 2019, we find that stocks with lower climate policy uncertainty beta generate about 4% annualized return compared to stocks with higher climate policy uncertainty beta. Specifically, our results support the ICAPM of Merton (Econom J Econom Soc 41:867–887, 1973), which indicates that uncertainty-averse investors demand extra compensation to hold stocks with lower climate policy uncertainty beta and they are willing to pay high prices and accept lower future returns for stocks with higher climate policy uncertainty beta.