ESSAYS ON EXTERNAL FORCES IN CAPITAL MARKETS
In the first chapter, I find counties more likely to be affected by climate change pay more in underwriting fees and initial yields to issue long-term municipal bonds compared to counties unlikely to be affected by climate change. This difference disappears when comparing short-term municipal bonds,...
| Main Author: | |
|---|---|
| Format: | Others |
| Published: |
UKnowledge
2019
|
| Subjects: | |
| Online Access: | https://uknowledge.uky.edu/finance_etds/10 https://uknowledge.uky.edu/cgi/viewcontent.cgi?article=1009&context=finance_etds |
| Summary: | In the first chapter, I find counties more likely to be affected by climate change pay more in underwriting fees and initial yields to issue long-term municipal bonds compared to counties unlikely to be affected by climate change. This difference disappears when comparing short-term municipal bonds, implying the market prices climate change risks for long-term securities only. Higher issuance costs for climate risk counties are driven by bonds with lower credit ratings. Investor attention is a driving factor, as the difference in issuance costs on bonds issued by climate and non-climate affected counties increases after the release of the 2006 Stern Review on climate change. In the second chapter, I document the investment value of alternative data and examine how market participants react to the data's dissemination. Using satellite images of parking lots of US retailers, I find a long-short trading strategy based on growth in car count earns an alpha of 1.6% per month. I then show that, after the release of satellite data, hedge fund trades are more sensitive to growth in car count and are more profitable in affected stocks. Conversely, individual investor demand becomes less sensitive to growth in car count and less profitable in affected stocks. Further, the increase in information asymmetry between investors due to the availability of alternative data leads to a decrease in the liquidity of affected firms. |
|---|