arXiv subjects

Sankarshan Basu

Publications and source records attributed to Sankarshan Basu.

3 recordsLinked to original sources

arXiv2024

The Carbon Premium: Correlation or Causation? Evidence from S&P 500 Companies

In the context of whether investors are aware of carbon-related risks, it is often hypothesized that there may be a carbon premium in the value of stocks of firms, conferring an abnormal excess value to firms' shares as a form of compensation to investors for their transition risk exposure through the ownership of carbon instensive stocks. However, there is little consensus in the literature regarding the existence of such a premium. Moreover few studies have examined whether the correlation that is often observed is actually causal. The pertinent question is whether more polluting firms give higher returns or do firms with high returns have less incentive to decarbonize? In this study, we investigate whether firms' emissions is causally linked to the presence of a carbon premium in a panel of 141 firms listed in the S\&P500 index using fixed-effects analysis, with propensity score weighting to control for selection bias in which firms increase their emissions. We find that there is a statistically significant positive carbon premium associated with Scope 1 emissions, while there is no significant premium associated with Scope 2 emissions, implying that risks associated with direct emissions by the firm are priced, while bought emissions are not.

q-fin.PR↗

arXiv2021

Single Event Transition Risk: A Measure for Long Term Carbon Exposure

Although there is a growing consensus that a low-carbon transition will be necessary to mitigate the accelerated climate change, the magnitude of transition-risk for investors is difficult to measure exactly. Investors are therefore constrained by the unavailability of suitable measures to quantify the magnitude of the risk and are forced to use the likes of absolute emissions data or ESG scores in order to manage their portfolios. In this article, we define the Single Event Transition Risk (SETR) and illustrate how it can be used to approximate the magnitude of the total exposure of the price of a share to low-carbon transition. We also discuss potential applications of the single event framework and the SETR as a risk measure and discuss future direction on how this can be extended to a system with multiple transition events.

q-fin.RM↗

arXiv2020

Modeling the commodity prices of base metals in Indian commodity market using a Higher Order Markovian Approach

A Higher Order Markovian (HOM) model to capture the dynamics of commodity prices is proposed as an alternative to a Markovian model. In particular, the order of the former model, is taken to be the delay, in the response of the industry, to the market information. This is then empirically analyzed for the prices of Copper Mini and four other bases metals, namely Aluminum, Lead, Nickel and Zinc, in the Indian commodities market. In case of Copper Mini, the usage of the HOM approach consistently offer improvement, over the Markovian approach, in terms of the errors in forecasting. Similar trends were observed for the other base metals considered, with the exception of Aluminum, which can be attributed the volatility in the Asian market during the COVID-19 outbreak.

q-fin.TR↗