Characteristics of companies associated with climate change predict excess equity returns. We show that firms with lower carbon emission intensities—with carbon emissions being a key component of the Paris Accord—have high excess returns. We present evidence that firms with lower carbon...

We document significant spreads in style factors — value, size, quality, momentum, and low volatility — in each of the style box categories. This is also true even for the value and small size factors, which are reflected in the original definition of the style box framework. Some single...

We construct fixed income portfolios for sovereign bonds and corporate bonds with sustainable insights. The climate methodology for sovereign bonds can be applied as an overlay on any benchmark and tilts towards sovereigns more prepared with the climate transition and away from those which are...

The authors embed Paris Aligned Benchmark (PAB) requirements in an illustrative multi-asset portfolio containing developed and emerging market equities, sovereign bonds, corporate bonds, listed real estate, and commodities. By being PAB compliant, the immediate reduction and ongoing reductions...

Second order Stochastic Dominance (SSD) has a well recognised importance in portfolio selection, since it provides a natural interpretation of the theory of risk-averse investor behaviour. Recently, SSD-based models of portfolio choice have been proposed; these assume that a reference distribution...

We develop a news-enhanced risk model, which utilizes news sentiments to optimize the valuation of market risk. In particular, our model takes into account news sentiment scores, which value news of various sources according to their relevance for particular companies. A GJR-GARCHX model is...

Multifactor models are often used as a tool to describe equity portfolio risk. Naturally, risk is dependent on the market environment and investor sentiment. Traditional factor models fail to update quickly as market conditions change. It is desirable that the risk model updates to incorporate...

The explosive development of electronic media has brought to the market participants thousands of pieces of financial news which are released on different platforms every day. Many news wires published online are editorially controlled and can be relied as factual summary as opposed to fake news...

Volatility prediction plays an important role in the financial domain. The GARCH family of prediction models is very popular and efficient in using past returns to forecast volatility. It has also been observed that news, scheduled and unscheduled, have an impact on return volatility of assets....

The rapid rise of social media communication has touched upon all aspects of our social and commercial life. In particular, the rise of social media as the most preferred way of connecting people on-line has led to new models of information communication amongst the peers. Of these media Twitter...