CLSBE - Dissertações de Mestrado / Master Dissertations
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- The effectiveness of green bonds in reducing carbon riskPublication . Caria, Mariana Cabral; Venter, ZoëThis study analyses the role of green bonds in mitigating carbon-related risks and supporting environmental growth in the European and US markets. Created approximately two decades ago, green bonds are used to finance environmentally friendly projects and to incentivize companies to adopt sustainable practices. This study uses a variety of models, including the CAPM, three-factor, and five-factor models, to investigate how green bonds affect the firms' cumulative abnormal returns (CARs) during carbon-related events using event studies and regression analysis. The findings show that larger companies with strong ESG ratings better manage risks, whilethose with higher emissions are penalized by the market. Compared to the US, the European market reacts more strongly to carbon risks. While challenges like inconsistent regulations and greenwashing still exist, this thesis highlights the potential of green bonds to support sustainability. By looking at both the benefits and drawbacks of green bonds, it offers practical insights for investors, policymakers, and businesses striving for a low-carbon future.
- Green bonds in a green stock market? : how shareholders perceive the issuance of green bonds in EuropePublication . Souza, Gabriela Silva de; Revelo, JoséEnvironmental concerns have been gaining increasing attention worldwide, and the financial sector has been no exception to this trend. In this scenario, green bonds have emerged as an attractive financial instrument for firms to issue debt and finance sustainabilityrelated projects. This study is focused on evaluating how shareholders react to the issuance of corporate green bonds and how that reaction changes in comparison to nongreen bonds and in periods of heightened environmental regulation. Using a dataset of 1,748 bonds issued in European Union countries between 2013 and 2023, the analysis employs descriptive statistics and panel data regressions. The main findings indicate that the issuance of green bonds can contribute to positive and statistically significant cumulative abnormal returns, although these stock market reactions do not tend to change significantly in periods of intense environmental regulation. Additionally, there were no significant findings indicating that after issuing green bonds, companies experience lower cost of debt or higher profitability. This paper contributes to the existing literature surrounding green bonds and impact investing, highlighting the financial benefits of such actions.
- Independence and crises : how central bank independence is affected by financial crisesPublication . Mendes, Bruno Lopes; Correia, Isabel HortaThis study examines the impact of different types of financial crises—banking, debt, and currency—on changes in Central Bank Independence (CBI), revealing that the effects vary depending on the crisis type. Using data on financial crises and central bank independence, this analysis introduces an innovative approach that accounts for the duration and dynamics of crises. Banking crises are found to reduce independence, particularly in areas such as the formulation of monetary policy, the institution’s financial independence, and a shift away from focusing on price stability. In contrast, currency and debt crises generally enhance CBI. Currency crises primarily strengthen independence in monetary policy formulation, the institution’s financial independence, reporting responsibilities, and restrictions on lending to the government. Debt crises, on the other hand, increase reporting responsibilities, reinforce the central bank’s focus on price stability, and introduce additional restrictions on government lending. These findings underscore the pivotal role of financial crises in reshaping central banks. Understanding how central banks adapt and respond to financial crises is crucial for explaining their current roles, the evolution of their mandates, and the reasons behind their growing independence and responsibilities over time.
- The dual impact of carbon emissions and financial performancePublication . Bohus, Ádám Gábor; Venter, ZoëThis thesis examines the relationship between carbon emissions and financial performance in Asian markets, employing Panel Vector Autoregression (PVAR) and pooled Ordinary Least Squares (OLS) regression. The study utilizes a comprehensive dataset covering firm-level data from 2007 to 2022, allowing for a robust analysis of the complex relationships between environmental and financial factors. The findings provide weak evidence for a carbon premium, suggesting that investors may demand higher returns from firms with high carbon emissions to compensate for environmental risks. Additionally, the results indicate that emission-intensive firms may face financial risks, as higher emission intensity is associated with increased leverage. However, other financial metrics, such as Return on Assets (ROA) and Market-to-Book Ratio, show inconsistent relationships with carbon emissions. These results highlight the challenges of reducing emissions and their limited influence on financial outcomes in emerging markets where regulatory pressures and market dynamics differ significantly from those in advanced economies. The study underscores the importance of tailored regulatory frameworks and strategic investments in sustainability, offering insights for policymakers and firms trying to find the golden path between environmental and financial goals.
- Common volatility shocks of ESG marketsPublication . Ánh, Dang Thi Ngoc; Martins, SusanaThis dissertation explores the interconnectedness and common volatility shocks in international ESG markets. Utilizing the MSCI ESG Leader Indices across eight regions, the study investigates whether idiosyncratic volatilities are correlated and identifies events triggering simultaneous movements. By employing the common volatility model proposed by Engle & Campos-Martins (2023), the research measures shared volatility shocks and their drivers, particularly focusing on climate policy uncertainty and transition and physical risks. The results show significant correlations between regional volatilities and identify key events that have caused the highest levels of volatility co-movement. The model also has portfolio implications, as regions have different exposures to the common factor. The most sensitive to volatility shocks are ESG market leaders such as Europe and the US, so emerging ESG markets such as Australia and Korea may be more attractive to risk-averse investors during periods of high ESG common volatility. Additionally, regression analysis shows that climate risks significantly influence these volatility shocks after controlling for global equity market shocks, highlighting the heightened sensitivity of ESG markets to climate dynamics after the Paris Agreement. Uncertainty surrounding climate policy and concerns about climate-related physical risks amplify shared volatility shocks in responsible markets. In contrast, shocks to climate transition risk exhibit a negative relationship with the factor, suggesting reduced exposure within the context of transitioning to a low-carbon economy. These findings provide novel insights for investors and policymakers, highlighting the importance of a stable regulatory environment and the role of ESG assets in the transition to a low-carbon economy.
- Momentum and ESG integration : a strategy for sustainable returnsPublication . Sousa, Tiago Vieira de; Silva, António Baldaque daThis dissertation investigates the integration of environmental, social and governmental (ESG) factors into a momentum strategy, intending to understand their impact on financial performance. To this end, a sample of common shares traded in the United States between January 2010 and September 2024 was used. ESG data was obtained from the LSEG Data & Analytics platform and stock returns were extracted from Datastream database. The study employs a zero-cost strategy, focusing on stocks simultaneously ranked in the best 10% in terms of returns and the best 30% regarding ESG scores, against those in the worst 10% and 30% in the same categories. The research concludes that the integration of sustainable metrics does not significantly improve the performance of the momentum strategy, instead, it increases idiosyncratic risk due to less diversification in stock selection rather than characteristics related to ESG inclusion. The results suggest that investors should not expect to obtain abnormal returns when trading momentum portfolios differentiated by ESG characteristics. Although the sustainable complement does not improve the traditional momentum strategy's overall performance, it reveals additional explanatory power of factors such as HML (value) and RMW (profitability), which become pertinent in determining returns. These conclusions underscore the complexity of sustainable incorporation and suggest the need to explore its long-term implications in detail, including broader market research and alternative ESG approaches.
- How do funding intensity and type influence initial public offering and strategic orientation of startups?Publication . Vaillant, Louis; Shuwaikh, FátimaThis study investigates the role of funding type and intensity on the time companies need to reach initial public offering (IPO). Based on a sample of 2727 US startups going public between 1995 and 2023 it was demonstrated that firms backed by corporate venture capital (CVC) experience significant shorter time to IPO especially when investments were done as a lead investor. Furthermore, it has been shown that firms with small and frequent funding amounts are statistically more likely to reach IPO sooner. These findings crossed with the strategic framework of ambidexterity, revealed that startups having shorter time to IPO tend also to show signs of a great balance between exploration and exploitation. This study provides new insights into strategic decisions of startups and investors during the pre-IPO funding journey of these firms to access public markets more quickly.
- The impact of the 2016 US presidential election on defense and fossil fuel stock returns : an event study of US and NATO marketsPublication . Blendert, Maren; Stahl, JörgThis thesis explores how the 2016 US presidential election, which saw Donald Trump’s unexpected win, impacted stock markets in the defense and fossil fuel industries. The study focuses not only on the US but also on NATO countries, which are linked to the US through defense and trade agreements. Using event study methods, it looks at how Trump's campaign promises - like increasing military spending, reducing regulations on fossil fuels, and pursuing an "America First" agenda - affected investor behavior in these industries. The results show that the defense sector reacted strongly and positively to Trump's victory. US defense stocks experienced significant abnormal returns, reflecting investor confidence in increased military budgets and government contracts. NATO defense stocks also showed positive reactions, although they were smaller than in the US. This suggests that investors expected NATO countries to align with US defense priorities, such as spending more on militaries. In contrast, the fossil fuel sector had weaker and more delayed responses. US fossil fuel stocks showed positive returns only in longer time windows, indicating initial investors’ hesitation about the feasibility of Trump's policies. NATO fossil fuel stocks had even smaller reactions, likely due to many NATO countries’ focus on renewable energy and stricter climate policies. This study highlights how different industries and regions respond to major political events. By including NATO countries, it provides a global perspective on the financial impact of US elections.
- Distress anomaly : an international analysisPublication . Pirovano, Alessandro; Reis, RicardoThe relationship between distress risk and returns has been puzzling and difficult to interpret, as distressed stocks have earned lower returns than expected throughout different years and geographical areas. This event has been labeled as the distress anomaly by practitioners. This study provides an in-depth analysis of the matter by dissecting more than 90 countries stock returns to find evidence and possible causes of the phenomenon. The results provide for contrasting evidence throughout the different levels of testing implemented, with traces of the anomaly found especially among emerging economies. country specific characteristics related to the private sector development and regulations seem to have an influence on the matter, as the lower the transparency and effectiveness of the measures is, the higher the probability is to find evidence of the anomaly.
- Does interest rate change at the FED affect european stock markets?Publication . Butkus, Karolis; Cerqueiro, GeraldoThis study explores how unexpected changes in the federal funds rate made by the FOMC influenced selected European stock markets between 2014 and 2024. This thesis focuses on sectoral and country (indices)-specific responses. Using the event study methodology, the daily stock returns of 300 companies in seven European indices were analysed for 4 different event windows. It measured CAARs for negative and positive outcomes of FOMC. Findings reveal that FED interest rate increases generally lead to significantly negative stock returns across most sectors, with the Utilities, Materials and Energy being the most adversely affected. Technology and Healthcare sectors demonstrated greater resilience, often yielding positive cumulative average abnormal returns. At the country level, most indices experienced negative returns during rate hikes. However, Italy (FTSEMIB) stands out as an exception, providing positive CAAR when interest rate increases probably due to its Financials sector's composition. During rate cuts, Sweden emerges as the only country with sustained positive returns. The study underscores the critical role of monetary policy spillovers in global financial markets. These results give investors useful information. They suggest sector-specific strategies and country-level diversification in response to changes in FED monetary policy. Limitations, such as overlapping global events and the interplay of European Central Bank policies, are acknowledged. This research contributes to the growing literature on international market integration and monetary policy effects.