| dc.description.abstract | This master thesis evaluates the effect of temperature on green stock returns, relative to the oil/gas-sector and the market in general. We decided to examine and expand the literature by including the Norwegian data, as previous studies have been carried out for American- and other European- countries. This paper focuses on three Norwegian portfolios; Green-Portfolio, Oil/Gas-Portfolio and the market in general, with all stocks trading on Oslo Stock Exchange. During the last decade there has been an increased focus on global warming, resulting in an increased willingness to invest in green stock companies. Investors are looking for possible explanations and relationships between different variables to strengthen their chances of obtaining a higher return at a lower risk.
After collecting and sorting temperature- and stock return data for Norway, we construct multiple bin-tests and perform regression analysis in order to investigate the relationship between temperature and our three Norwegian portfolios. Our key results seem to confirm a significant correlation between temperature and stock returns in Norway. The Green-Portfolio obtained higher returns for both abnormal high- and low temperatures. The Oil/Gas-Portfolio and the market in general follow the same return pattern, as oil/gas stocks make up a big part of the general market in Norway, where abnormal low temperature results in a higher return. The results obtained from our tests and analysis are in line with previous research, implying that aggressiveness may lead to an increased risk-taking, resulting in higher returns for risker stocks. An increased focus on global warming seems to be present in our results, as the Green- Portfolio reacts positively to abnormal high temperatures, whereas the Oil/Gas-Portfolio and the market in general reacts negatively. Overall, we find convincing evidence of a temperature effect on green stocks for abnormal high temperatures, relative to the Oil/Gas-Portfolio and market in general. | |