欧洲央行-当地的机构所有权和围绕极端天气的挑战（英）-2025_71页_5mb

Summary of ECB Working Paper Series No 3069

This working paper investigates the effect of market segmentation on stock returns during extreme weather events in Europe. The study analyzes how local institutional ownership (LIO) mitigates negative stock price impacts from physical climate risks.

Key Objectives

• Examine if LIO reduces negative abnormal returns around extreme weather events
• Test two information channels: physical distance and expected annual losses
• Compare impact of storms versus floods

Core Findings

1. Market Segmentation: Local institutional investors possess better knowledge of companies' climate risks due to geographic familiarity and information access.
2. LIO Effect: A 1% increase in LIO reduces negative abnormal returns by approximately 1.3 percentage points.
3. Event Type: Storm impact uncertainty leads to more negative stock reactions than predictable flooding.
4. Information Distance: The risk reduction effect of LIO is smaller when facilities are farther from headquarters.

Methodology

• Event study design using facility-level data from E-PRTR
• Machine learning name-matching algorithm to link companies to their production facilities
• Abnormal return estimation using market, 3F, 4F, and 5F factor models
• Sample of 4,162 European facilities and related 1,452 publicly listed companies

Limitations & Contributions

• Limitation: Could not fully isolate individual facility impact severity
• Contribution: Uses granular facility-level data for risk assessment under market segmentation

Implications

1. Policy: Should enhance facility-level climate risk data accessibility
2. Finance: Needs to consider local ownership and physical risk data in portfolio management

The study supports the information advantage hypothesis and contributes to understanding the role of market segmentation in climate-related asset price reactions.