Climate Change and the Nepalese Capital Market
Summary
Climate change is increasingly shaping returns and volatility in Nepal’s capital market, with high-salience climate events linked to negative market reactions across NEPSE, hydropower, banking, and hotel sectors. The study uses news-based climate indices and ARIMA/eGARCH models to show that climate shocks are priced as systemic financial risk.
Key Points
- The article argues that climate change has become a major driver of asset valuation and market sentiment in Nepal’s capital market.
- It constructs a daily climate change index from Nepalese news portals using TF-IDF and a climate-related vocabulary.
- ARIMA results show that high-salience climate events have an immediate negative impact on NEPSE, hydropower, banking, and hotel returns.
- eGARCH results indicate that high-salience climate events also increase volatility across major sectors of the Nepalese stock market.
-2.png)