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

64 Pages Posted: 21 Nov 2017 Last revised: 26 Jul 2018

See all articles by Asaf Bernstein

Asaf Bernstein

University of Colorado at Boulder; National Bureau of Economic Research (NBER)

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Ryan Lewis

University of Colorado, Boulder

Date Written: May 4, 2018

Abstract

Homes exposed to sea level rise (SLR) sell for approximately 7% less than 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 a 4% discount among properties not projected to be flooded for almost a century. Our findings contribute to the literature on the pricing of long-run risky cash flows and provide 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 (May 4, 2018). Journal of Financial Economics (JFE), Forthcoming, 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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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

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