Within the European financial sector, investment funds are more exposed to climate-sensitive economic sectors than banks, insurers and pension funds. However, few investment fund climate-related financial risk assessments have been conducted. We attempt to help fill this gap, using a dataset of...

Portfolio management is confronted with climate change – stronger and more rapidly than expected. Risks arising from the transition process from a brown, carbon-based to a green, low-carbon economy need to be integrated into portfolio and risk management. We show how to quantify these carbon...

This article studies the impact of carbon risk on stock pricing. To address this, we consider the seminal approach of Görgen et al. (2019), who proposed estimating the carbon financial risk of equities by their carbon beta. To achieve this, the primary task is to develop a brown-minus-green (or...

In response to Morningstar’s release of carbon risk (CR) scores in May 2018, (environmentally) sustainable mutual funds in the U.S. showed a greater reduction in their portfolio CR relative to conventional funds. The observed causal impact of this third-party disclosure is consistent with the...

Transitioning to a low-carbon economy to mitigate the effects of climate change involves risks. We investigate the effects of managerial ownership and management on the low-carbon transition risk of mutual fund portfolios and the effects of low-carbon transition risk on mutual fund performance...

This paper provides evidence on the interaction between hedge funds' performance and their market liquidity risk and funding liquidity risk. We demonstrate that funding liquidity risk is an important determinant of hedge fund performance. Hedge funds with high loadings on the funding liquidity...

In this paper, we propose a method for hedge fund replication using a factor-based model supplemented with a series of risk and return constraints that implicitly target all the moments of the hedge fund return distribution. We use the approach to replicate the monthly returns of ten broad hedge...

Following the Pension Protection Act of 2006, there was a sharp increase in the use of TDFs as default investment options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles, even for funds with the same target retirement date. Using...

Do risk disclosures by mutual funds reflect funds’ actual investment risks? Using textual analysis, we examine risk disclosures in funds’ summary prospectuses to determine whether funds do accurately disclose their risks. We first document the types of risks disclosed by funds and study the...