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We study an economy subject to recurrent disasters when agents have imprecise information about the frequency and …. Agents alter their optimal investment and consumption more intensely relative to the full-information benchmark, and the … full information and pay less for insurance against the next disaster …
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We exploit regional variations in exposure to heat stress to study if physical climate risk is priced in municipal and corporate bonds as well as in equity markets. We find that local exposure to damages related to heat stress equaling 1% of GDP is associated with municipal bond yield spreads...
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