When Green Investors Are Green Consumers
Preprint
- 10 May 2022
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
We bring investors with preferences for green assets to a general equilibrium setting in which they also prefer consuming green goods. Their preferences for green goods induce consumption premia on expected returns that counterbalance the green premium stemming from their preferences for green assets. Because they provide green investors with a financial hedge when green goods become expensive, brown assets command lower consumption premia on average, and green investors allocate a larger share of their wealth towards them. Empirically, the average difference in consumption premia between green and brown assets is 30 to 40 basis points per year and contributes to explaining the limited impact of green investing on polluting firms’ costs of capital.Keywords
This publication has 67 references indexed in Scilit:
- Sustainability, limited substitutability, and non-constant social discount ratesJournal of Environmental Economics and Management, 2011
- Market Liquidity and Funding LiquidityThe Review of Financial Studies, 2008
- The Effect of Introducing a Non-Redundant Derivative on the Volatility of Stock-Market Returns When Agents Differ in Risk AversionThe Review of Financial Studies, 2007
- Heterogeneous preferences and equilibrium trading volumeJournal of Financial Economics, 2007
- Asset Prices and Exchange RatesThe Review of Financial Studies, 2007
- Catching Up with the Joneses: Heterogeneous Preferences and the Dynamics of Asset PricesJournal of Political Economy, 2002
- Global Diversification, Growth, and Welfare with Imperfectly Integrated Markets for GoodsThe Review of Financial Studies, 2001
- An Equilibrium Model with Restricted Stock Market ParticipationThe Review of Financial Studies, 1998
- Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated WorldThe Review of Financial Studies, 1992
- Risk, Return, and Equilibrium: Empirical TestsJournal of Political Economy, 1973