We test for the existence of climate change risks in corporate bond returns. Using risk factors based on textual analysis of news articles, we estimate the sensitivity of bonds to climate change news. Bonds that covary highly with global warming news earn lower returns. We also test whether economic policy uncertainty moderates the relationship between bond returns and climate news risk. The lower returns to high climate-risk bonds are driven by periods of high economic policy uncertainty. Therefore, investors increase their demand for bonds that perform better in periods of high global warming risks, especially when economic uncertainty is high.
Using novel quarterly data of 29 U.S. states from 2005:I to 2015:IV, we revisit the link between consumer confidence and economic activity. We find that an innovation in consumer confidence is followed by a significant and persistent increase in consumption and output but a temporary decline in inflation. These findings suggest that the supply-side (news) interpretation of consumer confidence receives more empirical support than the demand-side (animal spirit) interpretation in our sample.