Next Article in Journal
Factors Influencing Adoption of Sustainable Farming Practices in Europe: A Systemic Review of Empirical Literature
Next Article in Special Issue
Impact of Sustainability on Firm Value and Financial Performance in the Air Transport Industry
Previous Article in Journal
Accessibility and Inclusive Tourism Development: Current State and Future Agenda
Previous Article in Special Issue
Jump Aggregation, Volatility Prediction, and Nonlinear Estimation of Banks’ Sustainability Risk
Article

Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns

Department of Business Administration, Rey Juan Carlos University, 28032 Madrid, Spain
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(22), 9721; https://doi.org/10.3390/su12229721
Received: 1 October 2020 / Revised: 18 November 2020 / Accepted: 19 November 2020 / Published: 21 November 2020
Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing model (CAPM) conditional on the event of nuclear disasters with that of the classic CAPM and the Fama–French three- and five-factor models. In order to control for nuclear disasters, we use an instrument that allows us to parameterize the linear stochastic discount factor of the conditional CAPM and transform the classic CAPM into a three-factor model. In this regard, the use of nuclear disasters as an explanatory variable for the cross-sectional behavior of stock returns is a novel contribution of this research. Our results suggest that nuclear disasters account for a large fraction of the variation of stock returns, allowing the CAPM to perform similarly to the Fama–French three- and five-factor models. Furthermore, our results show that, in general, nuclear disasters are positively related to the expected returns of a large number of assets under study. Our results have important implications for the task of estimating the cost of equity and constitute a step forward in understanding the relationship between equity risk premiums and nuclear disasters. View Full-Text
Keywords: nuclear hazard; rare disasters; corporate value; environmental sustainability; stock returns; CAPM; Fama–French model; conditioning information; discount rate; cost of equity nuclear hazard; rare disasters; corporate value; environmental sustainability; stock returns; CAPM; Fama–French model; conditioning information; discount rate; cost of equity
Show Figures

Figure 1

MDPI and ACS Style

Alonso-Conde, A.B.; Rojo-Suárez, J. Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns. Sustainability 2020, 12, 9721. https://doi.org/10.3390/su12229721

AMA Style

Alonso-Conde AB, Rojo-Suárez J. Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns. Sustainability. 2020; 12(22):9721. https://doi.org/10.3390/su12229721

Chicago/Turabian Style

Alonso-Conde, Ana B., and Javier Rojo-Suárez. 2020. "Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns" Sustainability 12, no. 22: 9721. https://doi.org/10.3390/su12229721

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop