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Carbon Emissions, Mutual Fund Trading, and the Liquidity of Corporate Bonds

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dc.contributor.authorZhang, Weiming (Elaine)
dc.contributor.authorCao, Jie
dc.contributor.authorLi, Yi
dc.contributor.authorZhan, Xintong
dc.contributor.authorZhou, Linyu (Lucy)
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2025-04-07T13:53:10Z
dc.date.available2025-04-07T13:53:10Z
dc.date.issued2021-07-08
dc.description.abstractThis 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.
dc.description.peerreviewedyes
dc.description.statusPublished
dc.formatapplication/pdf
dc.identifier.citationCao, J., Li, Y., Zhan, X., Zhang, W. E., & Zhou, L. L. (2023). Carbon emissions, mutual fund trading, and the liquidity of corporate bonds. Mutual Fund Trading, and the Liquidity of Corporate Bonds (January 11, 2023). http://dx.doi.org/10.2139/ssrn.3881497.
dc.identifier.doihttp://dx.doi.org/10.2139/ssrn.3881497
dc.identifier.urihttps://hdl.handle.net/20.500.14417/3714
dc.language.isoen
dc.relation.departmentFinance
dc.relation.entityIE University
dc.relation.schoolIE Business School
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/deed.en
dc.subject.keywordClimate risks
dc.subject.keywordCarbon emissions
dc.subject.keywordCorporate bonds
dc.subject.keywordMutual funds
dc.subject.keywordRedemption risks
dc.subject.keywordLiquidity
dc.titleCarbon Emissions, Mutual Fund Trading, and the Liquidity of Corporate Bonds
dc.typeinfo:eu-repo/semantics/workingPaper
dc.version.typeinfo:eu-repo/semantics/publishedVersion
dspace.entity.typePublication
relation.isAuthorOfPublication118ba7a2-fcd3-4d36-89cf-d908d3f35ff6
relation.isAuthorOfPublication.latestForDiscovery118ba7a2-fcd3-4d36-89cf-d908d3f35ff6
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