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Zhang, Weiming (Elaine)

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Weiming (Elaine)
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Zhang
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IE University
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IE Business School
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Finance
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Now showing 1 - 2 of 2
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    Publication
    Carbon Emissions, Mutual Fund Trading, and the Liquidity of Corporate Bonds
    (2021-07-08) Zhang, Weiming (Elaine); Cao, Jie; Li, Yi; Zhan, Xintong; Zhou, Linyu (Lucy); https://ror.org/02jjdwm75
    This paper investigates the effect of climate risks on corporate bond mutual funds’ trading activities and explores its mechanism. We find that investor flows negatively respond to mutual funds’ carbon exposure, leveraging the Paris Agreement as a shock. Such carbon-induced redemptions prompt mutual funds to sell bonds issued by high-carbon companies, especially the bonds held by funds with higher outflow-to-carbon sensitivity. We rule out the alternative hypothesis that a fundamental shift in funds’ investment preferences drives the reduction in high-carbon holdings. Moreover, we note a deterioration in the liquidity of high-carbon bonds, particularly those heavily owned by mutual funds.
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    Unlocking ESG Premium from Options
    (SSRN, 2023-03-24) Zhang, Weiming (Elaine); Cao, Jie ; Goyal, Amit; Zhan, Xintong (Eunice); https://ror.org/02jjdwm75
    We find that option expensiveness, measured by delta-hedged option returns, is higher for low-ESG stocks, indicating that investors pay a premium in the options market to hedge against ESG-related uncertainty. We estimate that this ESG premium is about 0.2% for 50 days. All three components of ESG contribute to option pricing. We find that investors pay the ESG premium to hedge against jump risks, but not volatility risks. The effect of ESG performance is more prominent during periods when attention to ESG is higher and for firms that are more subject to ESG-related risks.