Climate Change and Long-Run Discount Rates: Evidence from Real Estate

Giglio, Stefano; Maggiori, Matteo; Stroebel, Johannes; Weber, Andreas

doi:10.1093/rfs/hhab032

Cited by 237 publications

(81 citation statements)

References 88 publications

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“…26 For long-run physical risks, for example, sea level rise, assessing pricing efficiency is challenging, because such risks have not yet been realized and can only be proxied for through forecasts with unknown accuracy (see Giglio, Maggiori, Rao, Stroebel, and Weber (2021); Bernstein, Gustafson, and Lewis (2019); Bakkensen and Barrage (2019); Baldauf, Garlappi, and Yannelis (2020); Murfin and Spiegel (2020)).…”

Section: Testing the Accuracy Of Volatility Expectationsmentioning

confidence: 99%

Pricing Poseidon: Extreme Weather Uncertainty and Firm Return Dynamics

Kruttli¹,

Tran²,

Watugala³

2021

ERWP

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We present a framework to identify market responses to uncertainty faced by firms regarding both the potential incidence of extreme weather events and subsequent economic impact. Stock options of firms with establishments in forecast and realized hurricane landfall regions exhibit large increases in implied volatility, reflecting significant incidence uncertainty and long-lasting impact uncertainty. Comparing ex ante expected volatility to ex post realized volatility by analyzing volatility risk premia changes shows that investors significantly underestimate extreme weather uncertainty. After Hurricane Sandy, this underreaction diminishes and, consistent with Merton (1987), these increases in idiosyncratic volatility are associated with positive expected stock returns.

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Section: Testing the Accuracy Of Volatility Expectationsmentioning

confidence: 99%

Pricing Poseidon: Extreme Weather Uncertainty and Firm Return Dynamics

Kruttli¹,

Tran²,

Watugala³

2021

ERWP

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“…Our measure of international social connectedness could be used in tests hoping to distinguish between those theories. In this light, our research emphasizes the increasingly important role of data from online services-such as Facebook, LinkedIn, Twitter, eBay, Mint, Trulia, and Zillow-in overcoming important measurement challenges across the social sciences (see, for example, Baker, 2018; Giglio et al, 2015;Einav et al, 2015;Piazzesi et al, 2015).…”

Section: Discussionmentioning

confidence: 99%

International Trade and Social Connectedness

Bailey¹,

Gupta²,

Hillenbrand³

et al. 2020

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We use anonymized data from Facebook to construct a new measure of the pairwise social connectedness between 180 countries and 332 European regions. We find that two countries trade more with each other when they are more socially connected and when they share social connections with a similar set of other countries. The social connections that determine trade in each product are those between the regions where the product is produced in the exporting country and those where it is used in the importing country. Once we control for social connectedness, the estimated effect of geographic distance on trade declines substantially, and the effect of country borders disappears. Our findings suggest that social connectedness increases trade by reducing information asymmetries and by providing a substitute for both trust and formal mechanisms of contract enforcement. We also present evidence against omitted variables and reverse causality as alternative explanations for the observed relationships between social connectedness and trade flows.

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“…As a result, we hope that future research will further broaden our understanding of the importance of peer effects in product adoption decisions across a wider range of product categories. In this light, our research emphasizes the increasingly important role of data from online services-such as Facebook, LinkedIn, Twitter, eBay, Mint, Trulia, and Zillow-in overcoming important measurement challenges across the social sciences (see, for example, Baker, 2018;Giglio et al, 2015;Einav et al, 2015;Piazzesi, Schneider, and Stroebel, 2015). Specifically, we hope that the increasing availability of social network data, such as the Social Connectedness Index described in Bailey et al (2018a), will help to improve our understanding of the effects of social interactions on social, political, financial, and economic outcomes.…”

Section: Discussionmentioning

confidence: 99%

Peer Effects in Product Adoption

Bailey¹,

Johnston²,

Kuchler³

et al. 2019

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We study the nature of peer effects in the market for new cell phones. Our analysis builds on deidentified data from Facebook that combine information on social networks with information on users' cell phone models. To identify peer effects, we use variation in friends' new phone acquisitions resulting from random phone losses and carrier-specific contract terms. A new phone purchase by a friend has a substantial positive and long-term effect on an individual's own demand for phones of the same brand, most of which is concentrated on the particular model purchased by the friend. We provide evidence that social learning contributes substantially to the observed peer effects. While peer effects increase the overall demand for cell phones, a friend's purchase of a new phone of a particular brand can reduce individuals' own demand for phones from competing brands-in particular those running on a different operating system. We discuss the implications of these findings for the nature of firm competition. We also find that stronger peer effects are exerted by more price-sensitive individuals. This positive correlation suggests that the elasticity of aggregate demand is substantially larger than the elasticity of individual demand. Through this channel, peer effects reduce firms' markups and, in many models, contribute to higher consumer surplus and more efficient resource allocation.

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Climate Change and Long-Run Discount Rates: Evidence from Real Estate

Cited by 237 publications

References 88 publications

Pricing Poseidon: Extreme Weather Uncertainty and Firm Return Dynamics

Pricing Poseidon: Extreme Weather Uncertainty and Firm Return Dynamics

International Trade and Social Connectedness

Peer Effects in Product Adoption

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