Disaster on the Horizon: The Price Effect of Sea Level Rise

56 Pages Posted: 21 Nov 2017 Last revised: 24 Mar 2018

Asaf Bernstein

University of Colorado at Boulder

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Ryan Lewis

University of Colorado, Boulder

Date Written: March 19, 2018

Abstract

Homes exposed to sea level rise (SLR) sell at a 7% discount relative to observably equivalent unexposed properties equidistant from the beach. This discount has grown over time and is driven by sophisticated buyers and communities worried about global warming. Consistent with causal identification of long horizon SLR costs we find no relation between SLR exposure and rental rates, and current SLR discounts are not caused by differential investment, flooding, or views. Overall, we provide the first evidence on how markets price SLR exposure thereby contributing to the literature on how investors price long-run risky cash flows and providing insights for optimal climate change policy.

Keywords: Climate Change, Asset Prices, Beliefs, Sea Level Rise, Real Estate

JEL Classification: G1, G14, Q54

Suggested Citation

Bernstein, Asaf and Gustafson, Matthew and Lewis, Ryan, Disaster on the Horizon: The Price Effect of Sea Level Rise (March 19, 2018). Available at SSRN: https://ssrn.com/abstract=3073842 or http://dx.doi.org/10.2139/ssrn.3073842

Asaf Bernstein

University of Colorado at Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Ryan Lewis (Contact Author)

University of Colorado, Boulder ( email )

Boulder, CO 80309-0419
United States

Register to support our free research

Register

Paper statistics

Downloads
676
rank
33,066
Abstract Views
5,311
PlumX