Working Papers

• "The Real Cost of Benchmarking" [New 07/2024] (with Sebastian Hanson)
[Abstract]   [Draft]   [SSRN]   [BibTex]
This paper provides causal evidence that benchmarking-induced asset price distortions have real effects on corporate investment. We document that increased benchmarking over the past 20 years fundamentally changed the cross-section of stocks' CAPM βs. We establish causality using exogenous variation in stocks' benchmarking intensity around Russell index reconstitutions. Stocks' CAPM βs increase upon index inclusion with larger effects for stocks which experience larger benchmarking intensity increases. Firm managers perceive this as an increase in their cost of capital and reduce investment. Treated firms have 7.1% less physical and 8.4% less intangible capital after six years. We find consistent results at the industry level using long-differences from 2000 to 2016. At the aggregate level, increase in CAPM βs caused by benchmarking largely offset the decline in the risk-free rate over the past 20 years and can explain 57% of the missing investment puzzle.



@techreport{hansonkontz2024,
   title={The Real Cost of Benchmarking},
   author={Hanson, Sebastian and Kontz, Christian},
   type={Working Paper},
   institution={Stanford University},
   year={2024},
}




• "Do ESG Investors Care About Carbon Emissions? Evidence From Securitized Auto Loans" [Updated 08/2024]
  [Abstract]   [Draft]   [SSRN]   [BibTex]
  Securitized auto loans present a unique setting to measure the effects of ESG investing. I find that the ESG convenience yield almost quadrupled from 0.12% in 2017 to 0.46% in 2022. Consumers financing vehicles with loans from captive lenders benefit from the ESG convenience yield through lower borrowing costs. ESG mutual funds allocate more capital to securitizations from issuers with high ESG scores even if the securitizations finance high-emissions vehicles. The focus on ESG scores, rather than CO2, lowers the cost of capital for high-emissions vehicles. The findings suggest that green premia affect real quantities but do not raise the cost of CO2 emissions.
  
  
  
  @techreport{kontz2023esg,
     title={Do ESG Investors Care About Carbon Emissions? Evidence From Securitized Auto Loans},
     author={Kontz, Christian},
     type={Working Paper},
     institution={Stanford University},
     year={2023},
  }
  

Work in Progress

• "ESG Induced Capital Misallocation: is ESG Doing Good, by Doing Well?"
[Abstract]
This paper studies the impact of environmental, social, and governance (ESG) investing on the real economy. Using within industry-year variation, I find that 1.) firms with high ESG ratings have low marginal revenue products of capital (MRPK), while, 2.) firms with high sales per tCO2 emission have high MRPKs. This implies that reallocating capital to firms with high ESG ratings lowers allocative efficiency while reallocating capital to greener firms increases it. Motivated by these facts, I estimate a dynamic investment model featuring convenience yields on ESG assets and a CO2 externality to explore the implications of ESG investing for capital misallocation and climate change mitigation.



• "Explaining Prices" (with Sebastian Hanson and Hanno Lustig)


• "The Term Structure of Transition Risk" (with Florian Fiaux)