Do Fund Managers Misestimate Climatic Disaster Risk? (Summary)

CFA Institute Journal Review summarizes "Do Fund Managers Misestimate Climatic Disaster Risk?" by Shashwat Alok, Nitin Kumar, and Russ Wermers, from The Review of Financial Studies, March 2020.

Overview: 

The authors investigate whether portfolio managers address large-scale climate disasters rationally. Money managers headquartered near a region that has experienced such an event tend to underweight shares of firms within the disaster region relative to managers at some remove. One may attribute this overreaction to salience bias rather than any informational advantage. This salience bias negatively affects portfolio results.

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