This research investigates the influence of methodological choices in portfolio sorts on the size of the carbon premium. By analyzing more than 100,000 portfolio construction paths, we find that differences in the construction of brown-minus-green portfolios create a substantial non-standard error. From 2009 to 2022, the mean carbon premium is −0.16% per month, with a non-standard error of 0.26%. Methodological choices regarding the carbon transition risk proxy, the portfolio weighting scheme, and double sorting induce the largest variation, while controlling for common risk factors reduces it. Estimates of the carbon premium from firm-level regressions are similarly sensitive to methodological choices. Finally, we show that carbon allowance prices are related to the level of the carbon premium, whereas unexpected climate change concerns help explain periods of lower methodological uncertainty.

This research examines spillover effects of tax avoidance on peers' firm value using the setting of the European Commission's state aid investigations of private letter rulings. We assume that news about a firm's tax avoidance strategies also reveals information about peers' tax avoidance because investors expect similar firms to use similar strategies. Based on an event study design, we show that news about potential costs of tax avoidance of targeted U.S. multinational firms leads to negative stock price reactions among their peers. Moreover, peers' investors adjust their evaluations upward for news in favor of the targeted firms. Consistent with the level of tax avoidance being indicative of having similar strategies, spillover effects are stronger for firms with the highest levels of tax avoidance when examining a broad set of peers. Our findings suggest the need for a more comprehensive understanding of the costs and benefits of tax avoidance. Data Availability: Data are available from the public sources cited in the text.