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Journal articleMartinez-Toledano C, Gethin A, 2026,
Changing political cleavages across democracies around the world
, Handbook of Political Economy -
Journal articleBolton P, Eskildsen M, Kacperczyk M, 2026,
Carbon home bias
, Journal of Financial Economics, ISSN: 0304-405XInstitutional investors apply stricter carbon screens abroad than at home. Using global equity holdings for roughly 13,400 institutions across 48 countries over 2005–2024, we show that higher firm emissions predict lower foreign institutional ownership with no corresponding reduction at home; the domestic-foreign ownership gap widens with emissions, and domestic ownership rises with Scope 3 emissions. This carbon home bias remains in within-investor and within-firm comparisons and is not explained by the countrypair determinants of ordinary home bias. It operates through both re-entry (foreign high emitters face a higher hurdle to re-enter a portfolio) and exit (a higher hazard of leaving it). This bias intensified after the Paris Agreement and did not unwind during the subsequent anti-ESG reaction. It is concentrated in discretionary rather than index-constrained holdings; at the extensive margin, the incremental bias is largest among pension funds—institutions particularly associated with formal investment-policy restrictions, and better covered by European than by U.S. filings—rather than among managers best placed to exploit an informational advantage. Overall, the evidence is more consistent with institutional constraints and screening policies than with a simple information-advantage explanation.
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Journal articleBaz S, Cathcart L, Michaelides A, et al., 2026,
Climate regulatory exposure and the stock market: evidence from the Trump elections
, European Financial Management, ISSN: 1354-7798Using the 2016 and 2024 Trump elections as exogenous climate deregulatory shocks, we identify a positive effect on stock returns for firms with higher climate regulatory exposures. We construct firm-level climate regulatory exposure using 10-K filings; firms with higher exposure experience economically and statistically significant higher cumulative stock returns after both elections but the responses are economically stronger, faster, and more persistent after the 2024 election. Results remain robust after controlling for carbon emissions, corporate taxation exposures and trade policy uncertainty, and provide evidence that climate regulatory risks are important in valuation.
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Journal articleKosova R, Michaelides A, 2026,
Trust and investment loss: evidence from uk financial corporate failures
, Journal of Financial Literacy and Wellbeing, Vol: 4, ISSN: 2753-3212How does experiencing direct investment loss affect individuals’ trust in the financial system? Exploiting recent UK corporate financial failures that generated press headlines, government debates and institutional criticisms, we design and analyse a survey involving investors in these failures. We find that direct exposure to investment losses significantly reduces trust in financial markets, regulators, big audit firms, and the likelihood of future risky asset market participation. Moreover, trust loss is not fully reversible even with possible compensation. Individual characteristics are not the key drivers of trust losses/gains either. We also survey master’s students exposed to reading about these failures. Information about losses of others reduces trust but less than direct experience. Overall, our results emphasize the role of personal experience in determining trust and future investment decisions.
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Journal articleBonomi G, Uppal A, 2026, , Journal of Economic Theory, Vol: 237, ISSN: 0022-0531
We develop a model in which the central bank incorporates financial stability concerns into its monetary policy and communication decisions, while systemic banks strategically choose portfolios to influence policy. Because fully responding to economic shocks would generate policy surprises that threaten bank stability, the central bank underreacts to those shocks, consistent with the Federal Reserve’s response during the 2023 banking crisis. Anticipating this accommodation, banks tilt their portfolios to increase the financial-stability costs of rate hikes, pulling monetary policy toward lower rates while giving the central bank an incentive to announce higher future rates than it expects to set. Financial stability concerns can therefore backfire, creating a novel responsiveness–credibility trade-off: the more the central bank accommodates banks’ exposures ex post, the less credible its forward guidance becomes ex ante, making it harder for banks to align their portfolios with future policy and leaving them more exposed to policy surprises. Even when society values financial stability, it benefits from appointing a central banker who places less weight on it. Paradoxically, even banks may prefer such a central banker when the benefits of more credible guidance outweigh the loss of policy influence.
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Journal articleHarrison SP, Prentice IC, Ascoli D, et al., 2026, , Frontiers in Environmental Science, Vol: 14, ISSN: 2296-665X
Extreme wildfires are becoming more frequent in the Mediterranean region and already frequently exceed controllable thresholds, leading to large impacts on natural and social systems. Wildfire risk is predicted to increase in the region over the 21st century because of ongoing global climate changes. The risk of wildfires is being exacerbated by rural land abandonment, which is promoting increased landscape flammability; and by expansion of the wildland-urban interface. To address the challenges arising from fire regime changes, there is an urgent need to improve existing management strategies to reduce fire risk and to minimise the occurrence of extreme wildfires. Doing so successfully requires integrating insights across varied wildfire management paradigms, that stem from diverse disciplinary traditions and often serve competing policy priorities. Here we review the state of knowledge and practice on wildfire management in the Mediterranean region. We begin by highlighting the diversity of land management practices that deliberately or indirectly have been used for fire risk mitigation, shaping contemporary Mediterranean landscapes and fire regimes. We then summarise the evolution of policy priorities and fire management practices, and how these changes in infrastructural, economic and legal frameworks could influence landscape vulnerability to wildfire. We also examine some of the barriers that work against the adoption of management strategies to minimise wildfire risk at local and national levels. The paper brings together ecological, land-management, governance, planning and economic perspectives that are often treated separately, in order to clarify where current wildfire risk reduction strategies are supported by evidence and where important barriers remain. Finally, we integrate these different insights to identify key knowledge gaps and make recommendations for future action.
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Journal articleLi Z, 2026, , The Review of Financial Studies, ISSN: 0893-9454
This paper proposes a new channel through which long-term interest rates transmit to credit spreads. When life insurers carry negative duration gaps, higher rates reduce their liabilities more than assets. Rate increases therefore boost equity and risk-bearing capacity, lowering equilibrium credit spreads. Empirically, I test this channel with bond-level yields and a maturity-based discontinuity in bond ownership. Insurers’ trades confirm the mechanism: after rates rise, insurers shift portfolios towards riskier, high-yield bonds. As rates increase, bonds more heavily held by life insurers experience greater spread reductions. The results show that institutional duration mismatch shapes credit spreads and corporate financing conditions.
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Journal articleGoldman J, Iyer R, Nanda R, 2026,
Amplifying a fiscal stimulus: the role of banks
, Journal of Finance, ISSN: 0022-1082Exploiting increases in US defense spending following the 9/11 attacks, we show that the procurement-driven fiscal stimulus led to lower non-performing loans at banks.In turn, constrained banks responded by increasing lending to small businesses in not-directly-impacted counties. We find the additional economic activity enabled by the increased lending capacity is quantitatively important– amplification from this ‘credit multiplier’ is about 10%-15% as large as typical fiscal multipliers estimated inthe literature. Since intermediaries are more likely to face constraints in times when a fiscal stimulus is needed, this ’credit multiplier’ can substantially amplify a stimulus’overall impact in downturns.
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Journal articleRaponi V, Zaffaroni P, 2026, , Management science, ISSN: 0025-1909
This paper introduces a novel methodology for analyzing anomalies in conditional asset pricing models with time-varying risk exposures and premia. Our approach extends the conventional two pass methodology to include both ordinary and weighted least-squares estimation in a conditional setting. We establish closed-form standard errors to statistically dissect anomalies, including aversion robust to global misspecification. We introduce a novel R-squared criterion to quantify the joint contribution of large anomaly sets in explaining cross-sectional stock return variations. Our analysis highlights the significant impact of anomalies during economic and financial crises, linking them closely with market conditions.
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Journal articleKacperczyk M, Peydro J-L, 2026, , The Review of financial studies, ISSN: 0893-9454
We study how firm-level carbon emissions affect bank lending and real outcomes in a sample of global firms with syndicated loans. We exploit bank-level climate commitments as firm-level shocks to lending relationships, using firms' prior credit exposures to identify credit supply effects. Firms with higher emissions that previously borrowed from committed banks receive less bank credit. Evidence from lending volumes, prices, and within-firm-time loan-level data indicates a supply-side shift away from high-emission firms, not explained by borrower risk. Affected firms reduce debt, leverage, size, and investment, yet we find no reduction in future emissions, instead documenting evidence consistent with greenwashing.
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