Effect of climate protests on short-term stock returns

Abstract

This Master’s thesis studies whether climate protests that are reported in the media affect short-term stock returns in Finland, France, Germany and United Kingdom. Especially, this thesis focuses on returns of so-called green and brown stocks. The main goal of this thesis is to find out whether climate protests, that are reported in the media, make brown stocks underperform relative to green stocks during the climate protests.

To answer this question, I construct country-specific green and brown portfolios and calculate the returns of these portfolios during every event. Additionally, I calculate the correlations between individual stocks’ abnormal returns and carbon intensity values. Finally, I perform regression analysis to test whether individual stocks’ abnormal returns are significantly explained by their carbon intensity values.

The main finding of the thesis is that climate protests collectively do not make brown stocks underperform relative to green stocks. Underperformance of brown stocks is visible only during local protests, and even then, the results are not fully consistent. During global protests, brown stocks surprisingly perform better than green stocks. Individually, the results vary greatly between countries. United Kingdom provides the most evidence of brown stocks’ underperformance. In Finland, France and Germany the results show very little evidence of brown stocks’ underperformance.