The Stock Market Pricing of Green and Brown Firms: Evidence from U.S. Presidential Elections

Sammanfattning

This paper provides evidence that U.S. presidential elections generate systematic differences in cumulative abnormal returns between green and brown firms. Conducting an event study across the 2016, 2020, and 2024 elections, we find that Republican outcomes are associated with a relative outperformance of brown firms, while the 2020 Democratic outcome produces the reverse. This green-minus-brown return differential is consistent with investors repricing climate policy exposure in response to information shocks manifested by election outcomes. We find that the consistency of this pattern across the years varies depending on the choice of climate exposure proxy used for portfolio construction, while the magnitude of the repricing can potentially be attributed to the political context of each election.