Speakers: Floor van der Sanden and Djep Doreleijers, Tilburg University
Title Floor: Is there a Carbon Premium?
Abstract: Climate change necessitates global action, with policy regulations and shifting consumer attitudes introducing additional risks in the journey towards a greener economy. Assessing how these risks affect firm valuation, particularly for polluting versus eco-friendly firms, is vital. Besides varied theoretical perspectives, empirical observations reflect diverse conclusions on the link between environmental and financial performance. Analyzing data from 2007 to 2023 across more than 10,000 firms in 90 countries, we examine the sensitivity of research findings to methodological choices. Our main discovery supports a negative carbon premium, indicating eco-friendly firms outperform. However, we demonstrate that this conclusion is contingent upon several factors, including the treatment of unscaled emissions, the inclusion of vendor-estimated emissions, temporal considerations regarding emissions and accounting data, and, to some extent, the model employed, distinguishing between panel regression analysis and portfolio analysis. These results underscore the need for careful interpretation of previous research on the environmental-financial performance association.
Title Djep: Optimal Consumption, Investment, and Insurance Strategy Over the Life-Cycle for a Regret-Averse Investor
Abstract: Regret is a very common and persistent emotion among investors (Zeelenberg et al, 1998; Zeelenberg, 1999). However, there has been done relatively little research on optimal asset allocation in combination with regret theory (Bell, 1982; Loomes and Sugden, 1982). This presentation discusses the research done on the optimal consumption-investment[1]insurance strategy for a risk- and regret-averse investor who is subject to biometric risks. This research extended the work done by Hambel et al. (2022). The preferences of the investor are assumed to be given by a regret-adjusted stochastic differential utility specification (Duffie and Epstein, 1992). An alternative multiplicative regret utility function and regret-adjusted normalized aggregator function have been proposed to model the preferences of the investor. Closed-form solutions have been derived for any arbitrary elasticity of intertemporal substitution parameter value. It has been proven that it is optimal for a risk- and regret-averse agent to invest more into the risky asset than for a purely risk[1]averse agent under a weak condition.