TY - JOUR
T1 - Sea-Level Rise Exposure and Municipal Bond Yields
AU - Goldsmith-Pinkham, Paul
AU - Gustafson, Matthew T.
AU - Lewis, Ryan C.
AU - Schwert, Michael
N1 - Publisher Copyright:
© 2023 The Author(s). Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. [br]For permissions, please e-mail: [email protected].
PY - 2023/11/1
Y1 - 2023/11/1
N2 - Municipal bond markets began pricing sea-level rise (SLR) exposure risk in 2013, coinciding with upward revisions to worst-case SLR projections and accompanying uncertainty around these projections. The effect is larger for long-maturity bonds and not solely driven by near-term flood risk. We use a structural model of credit risk to quantify the implied economic impact and distinguish between the effects of underlying asset values and of uncertainty. The SLR exposure premium exhibits a trend different from house prices and is unaffected by house price controls. Together, our results highlight the importance of climate uncertainty in driving municipal bond prices.
AB - Municipal bond markets began pricing sea-level rise (SLR) exposure risk in 2013, coinciding with upward revisions to worst-case SLR projections and accompanying uncertainty around these projections. The effect is larger for long-maturity bonds and not solely driven by near-term flood risk. We use a structural model of credit risk to quantify the implied economic impact and distinguish between the effects of underlying asset values and of uncertainty. The SLR exposure premium exhibits a trend different from house prices and is unaffected by house price controls. Together, our results highlight the importance of climate uncertainty in driving municipal bond prices.
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U2 - 10.1093/rfs/hhad041
DO - 10.1093/rfs/hhad041
M3 - Article
AN - SCOPUS:85168257085
SN - 0893-9454
VL - 36
SP - 4588
EP - 4635
JO - Review of Financial Studies
JF - Review of Financial Studies
IS - 11
ER -
