Pricing of green regulatory and technological risks, Job Market Paper

I use text analysis of U.S. firms’ press releases to build measures of their exposure to environmental regulation risk and to risks associated with green technologies. I estimate the associated regulation and technological risk premia. The time series of these risk premia reveal three findings. First, the regulation and technological risk premia are negatively correlated. Second, under Democrat administrations, firms more exposed to regulation risk command higher expected returns and firms more active in green innovation lower expected returns. Under Republican control, the regulatory risk premium disappears and the technological risk premium switches sign. Third, environmental regulations tend to be followed by a decrease in the technological risk premium. I introduce a tractable consumption-based asset pricing model, which features both regulation and innovation risks and captures these empirical results well. The model underlines the crucial role of innovation in the transition to a low-carbon economy.

Presentations: HEC 8th PhD Workshop, CFE-CMStatistics 2024, CMAP-CREST Quantitative Sustainable Economics and Finance seminar, SoFiE 2025 (poster), FinEML 2025 (poster)

Asset pricing in a quadratic equilibrium model without disasters, with Elise Gourier