Greenhouse Gas Emissions and the Stability of Equity Markets

Authors

David Y. Aharon, Ono Academic College
Ahmed S. Baig, Boise State UniversityFollow
Gady Jacoby, University of Manitoba
Zhenyu Wu, University of Manitoba

Document Type

Article

Publication Date

4-2024

Abstract

We test the impact of GHG emissions on equity markets’ volatility. Our results confirm that CO₂ and other greenhouse gases emissions such as agricultural nitrous oxide, and methane emissions are associated with increased stock market volatility. This relationship holds across different measures of volatility, emissions, and specifications using nearly 30 years’ worth of index-level data from stock exchanges across 50 countries. These findings lend support to the notion that carbon risk is priced into financial markets, and that green finance could promote more stable global equity markets in the future and thereby foster a more sustainable economic system.

Publication Information

Aharon, David Y.; Baig, Ahmed S.; Jacoby, Gady; and Wu, Zhenyu. (2024). "Greenhouse Gas Emissions and the Stability of Equity Markets". Journal of International Financial Markets, Institutions and Money, 92, 101952. https://doi.org/10.1016/j.intfin.2024.101952