Does Climate Change Affect Real Estate Prices? Only If You Believe In It
By Markus Baldauf, Lorenzo Garlappi, Constantine Yannelis. The Review of financial studies, 2020
481 citations recorded by the source corpus.
This paper studies whether house prices reflect belief differences about climate change. We show that in an equilibrium model of housing choice in which agents derive utility from ownership in a neighborhood of similar agents, prices exhibit different elasticities to climate risk. We use comprehensive transaction data to relate prices to inundation projections of individual homes and measures of beliefs about climate change. We find that houses projected to be underwater in believer neighborhoods sell at a discount compared to houses in denier neighborhoods. Our results suggest that house prices reflect heterogeneity in beliefs about long-run climate change risks.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/08bbe5a83e1dd25c35fedcc3bd72260b77e27d81
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Citations in the corpus
- Dissecting Climate Risks: Are they Reflected in Stock Prices? (2021, background): “Baldauf et al. (2020) find little evidence that the flood risk due to rising sea levels is incorporated in coastal real estate prices, whereas Bernstein et al. (2019) and Giglio et al. (2021b) find that this specific risk is incorporated. Painter (2020) and Goldsmith-Pinkham et al. (2021) find that ”
- Does the CDS Market Reflect Regulatory Climate Risk Disclosures? (2020, unknown): “While Baldauf et al. (2020) find that flood risk affects real estate prices under certain conditions, Hong et al. (2017) observe that market prices of food firms are not incorporating climate-change risks.3 Thus, considering the various effects (1)In terms of likelihood, the top five identified risk”
- Climate Regulatory Risks and Corporate Bonds (2020, unknown): “However, there also exists mixed evidence on the effects of physical climate risk on real estate values(Bernstein et al., 2019; Murfin and Spiegel, 2020; Baldauf et al., 2020).”
- Climate Change News Risk and Corporate Bond Returns (2020, unknown): “In addition, climate risk also affects the prices of municipal bonds (Goldsmith-Pinkham, Gustafson, Lewis, and Schwert (2020) and Painter (2020)) and house prices (Giglio, Maggiori, Rao, Stroebel, and Weber (2018), Bernstein, Gustafson, and Lewis (2019), and Baldauf, Garlappi, and Yannelis (2020)).”
- Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections (2021, unknown): “Recent studies include Addoum, Ng, and Ortiz-Bobea (2020, 2019), Andersson, Bolton, and Samama (2016), Baldauf, Garlappi, and Yannelis (2020), Bartram, Hou, and Kim (2019), Berkman, Jona, and Soderstrom (2019), Bernstein, Gustafson, and Lewis (2019), Bolton and Kacperczyk (2020a,b), Ceccarelli,…”