Does the Salience of Climate-Related Risk Affect Asset Prices?

68 Pages Posted: 15 Jun 2019 Last revised: 6 Nov 2023

See all articles by Cloé Garnache

Cloé Garnache

University of Oslo, Department of Economics; Oslo and Akershus University College - Oslo Metropolitan University

Date Written: November 3, 2023

Abstract

Using regression discontinuity and difference-in-differences designs to compare prices of California homes across a new wildfire risk zone boundary, I identify null effects in the immediate vicinity of the new risk zone boundary. In contrast, prices of homes newly assigned to a riskier zone drop by 2.5% further away from the new risk zone boundary. These findings suggest that households do not respond to the risk salience triggered by the new risk zone assignment, but instead update their risk beliefs in response to re-zoning in a way that is consistent with the actual wildfire risk.

Keywords: climate-related risks, risk salience, risk zoning, regression discontinuity design, difference-in-discontinuities, real estate

JEL Classification: D83, G1, G14, G18, Q54, R30

Suggested Citation

Garnache, Cloe, Does the Salience of Climate-Related Risk Affect Asset Prices? (November 3, 2023). Available at SSRN: https://ssrn.com/abstract=3398404 or http://dx.doi.org/10.2139/ssrn.3398404

Cloe Garnache (Contact Author)

University of Oslo, Department of Economics ( email )

Postboks 1095
Oslo, 0317
Norway

HOME PAGE: http://www.cloegarnache.com

Oslo and Akershus University College - Oslo Metropolitan University ( email )

PO Box 4, St Olavs plass
Oslo, 0130
Norway

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