{"title":"Extreme-weather risk and the cross-section of stock returns","authors":"Alexander Braun, Julia Braun, Florian Weigert","doi":"10.1111/jori.70022","DOIUrl":null,"url":null,"abstract":"<p>We document an extreme-weather risk premium in the cross-section of stock returns. Between 1995 and 2019, stocks of domestic U.S. firms with the most negative sensitivity to aggregate storm losses earned an annual excess-return spread of more than 6 percentage points relative to those with the most positive sensitivity, a difference not explained by standard factors. Fama-MacBeth regressions confirm that more negative storm-risk betas predict higher subsequent returns. The premium concentrates in geographically exposed and historically affected firms and in institutionally held stocks, consistent with fundamental-risk and salience channels. Our results establish a link between physical climate risk, the cost of equity, and ultimately firm value.</p>","PeriodicalId":51440,"journal":{"name":"Journal of Risk and Insurance","volume":"93 1","pages":"163-198"},"PeriodicalIF":1.9000,"publicationDate":"2025-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/jori.70022","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Risk and Insurance","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jori.70022","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We document an extreme-weather risk premium in the cross-section of stock returns. Between 1995 and 2019, stocks of domestic U.S. firms with the most negative sensitivity to aggregate storm losses earned an annual excess-return spread of more than 6 percentage points relative to those with the most positive sensitivity, a difference not explained by standard factors. Fama-MacBeth regressions confirm that more negative storm-risk betas predict higher subsequent returns. The premium concentrates in geographically exposed and historically affected firms and in institutionally held stocks, consistent with fundamental-risk and salience channels. Our results establish a link between physical climate risk, the cost of equity, and ultimately firm value.
期刊介绍：
The Journal of Risk and Insurance (JRI) is the premier outlet for theoretical and empirical research on the topics of insurance economics and risk management. Research in the JRI informs practice, policy-making, and regulation in insurance markets as well as corporate and household risk management. JRI is the flagship journal for the American Risk and Insurance Association, and is currently indexed by the American Economic Association’s Economic Literature Index, RePEc, the Social Sciences Citation Index, and others. Issues of the Journal of Risk and Insurance, from volume one to volume 82 (2015), are available online through JSTOR . Recent issues of JRI are available through Wiley Online Library. In addition to the research areas of traditional strength for the JRI, the editorial team highlights below specific areas for special focus in the near term, due to their current relevance for the field.
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