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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Impact of the Paris Agreement on fossil fuel stock returns |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2020 |
| Abstract Text | When financial markets perfectly incorporate global-climate-change-tackling information delivered by the Paris Agreement into security prices, the stock performance of high GHG emission industries, especially of fossil fuel firms, is supposed to decrease due to the upshifting expectation on fossil fuel assets becoming stranded. In this empirical paper, a standard event study is applied to explore the effect of the Paris Agreement on 101 America fossil fuel stock returns. The null hypothesis of this study is that the ratification and coming into force of Paris Agreement negatively affect fossil fuel firms´ stock returns. One main contribution of my study is that an additional regression is designed to detect whether the stock abnormal reaction is impacted by each firm´s fossil fuel reserves amount. The logic behind this setting is that the higher fossil fuel reserves one company holds, the more risk this firm will face once the fossil fuel asset gets stranded. The findings show that when considering firms with US located fossil fuel reserves, there is a statistically significant but short-lasting negative impact on fossil fuel firms´ stock return when the accord is signed in 2015, and the fossil fuel reserve holdings have a moderate negative effect on the stocks´ abnormal return. When taking all firms with reserves in and outside of the US into the study, the Paris Agreement shows no significant impact on stock returns, and the impact of fossil fuel reserve holdings also disappears. |
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