How Easy is it for Investment Managers to Deploy their Talent in Green and Brown Stocks?

10 Pages Posted: 17 Jan 2022 Last revised: 18 May 2022

See all articles by David Ardia

David Ardia

HEC Montreal - Department of Decision Sciences

Keven Bluteau

Université de Sherbrooke - Faculty of Administration

Thien Duy Tran

HEC Montreal

Date Written: January 14, 2022

Abstract

We explore the realized alpha-performance heterogeneity in green and brown stocks’ universes using the peer performance ratios of Ardia and Boudt (2018). Focusing on S&P 500 index firms over 2014-2020 and defining peer groups in terms of firms’ greenhouse gas emission levels, we find that, on average, about 20% of the stocks differentiate themselves from their peers in terms of future performance. We see a much higher time-variation in this opportunity set within brown stocks. Furthermore, the performance heterogeneity has decreased over time, especially for green stocks, implying that it is now more difficult for investment managers to deploy their skills when choosing among low-GHG intensity stocks.

Keywords: Greenhouse gas emissions (GHG), climate finance, carbon finance, peer performance

JEL Classification: G11, G18, G24, Q01, Q54

Suggested Citation

Ardia, David and Bluteau, Keven and Tran, Thien Duy, How Easy is it for Investment Managers to Deploy their Talent in Green and Brown Stocks? (January 14, 2022). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4009286 or http://dx.doi.org/10.2139/ssrn.4009286

David Ardia (Contact Author)

HEC Montreal - Department of Decision Sciences ( email )

3000 Côte-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Keven Bluteau

Université de Sherbrooke - Faculty of Administration ( email )

Sherbrooke, Québec J1K 2R1
Canada

Thien Duy Tran

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

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