Robert Killins

This study explores the dynamic interactions between price shocks to commodity markets and investor demand, proxied by fund flows, in environmental, social, and governance (ESG)-labeled global equity and bond funds. By focusing on labeled funds, the analysis isolates the sustainability signal that investors observe at the point of allocation. Using a time-varying parameter vector autoregression connectedness framework and controlling for broad equity and bond market conditions, the paper shows that ESG-labeled fund flows are less integrated with the broader system than conventional benchmarks on average, but they display clear asymmetries across commodity classes. Energy commodities are the main commodity transmitters to ESG equity fund flows, whereas industrial metals are the main commodity transmitters to ESG bond fund flows. Dynamic spillovers intensify sharply around the COVID-19 market dislocation and the Russia-Ukraine shock. In the second-stage analysis, stock-market uncertainty dominates in the full sample and pre-crisis period, whereas interest-rate uncertainty dominates during COVID-19 and oil-market uncertainty dominates during the Russia-Ukraine period. These findings show that investor demand for labeled sustainability exposure is state dependent and responds differently to transition-related shocks across equity and bond ESG segments.

In Sustainability and Electrification of the Automobile Industry: Battery Metals and Equity Returns from the July 2023 issue of The Journal of Investing , Robert B. Burney and Robert N. Killins of Coastal Carolina University find that the equity returns for electric vehicle (EV) manufacturers have a negative relationship with lithium prices. This relationship supports a production-cost effect for EV manufacturers, but it does not reach statistical significance for traditional automakers. The production-cost effect of lithium suggests that EV automakers have a difficult time passing along the increased production costs associated with higher lithium prices to consumers without negatively impacting EV demand. Conversely, the authors find that equity returns for both EV and traditional automakers have a positive relationship with nickel prices. This indicates that increases in nickel prices reflect higher demand for EVs, and production costs are therefore easier to pass on to consumers without significantly impacting demand. The authors noted that the analysis does not provide uniform evidence of a production-cost effect or an EV-demand effect from battery metal prices, with the variance of results likely due to the evolving and dynamic transition to EVs.

With significant changes in environmental policies across the globe, battery metals will likely play an important role in the transition to a “carbon neutral” global economy. Given that the automobile industry has been pushed towards reducing the carbon footprint of its products, and electric vehicles are becoming more mainstream, both investment professionals and academic researchers must understand how battery metals may impact enterprise performance and financial asset prices in the automobile industry. This article both provides an overview of the EV/Battery Metals landscape and reports on initial empirical research into the asset pricing/returns implications. This research sheds light on how prices of battery metals may impact automobile manufacturer’s equity prices, and thus can aid investment professionals in formulated strategies related to the megatrend of electrification. Although the results of the battery metal regression modeling fail to provide robust support for either a “production-cost effect” or an “EV-demand effect”, this research does provide a stepping stone for both academics and practitioners. Battery metals supply, geographic distribution of reserves, environmental concerns, and proper hedging mechanisms are all fertile ground for additional research.

Using monthly data from January 2000 to August 2018, this paper examines how the Canadian oil and gas industry and individual firms’ equity prices react to oil price fluctuations, which are measured by the traditional West Texas Intermediate (WTI) benchmark and the Canada-specific Western Canadian Select (WCS) benchmark. The findings provide support for the view that oil price movements are an important factor in explaining the equity returns of the overall industry and for many individual oil and gas firms in Canada. Both WTI and WCS measures provide statistically significant evidence, but the results support that WTI may still be the more relevant measure for Canadian-based firms. We also find that the spread between WTI and WCS has a minimal impact on the firms’ equity returns. Additional tests for asymmetric impacts of oil price movements on Canadian oil and gas equity returns have provided little evidence, whereas time-varying impacts are found for a handful of firms. The empirical findings predicated on the holistic view of the impacts of oil price fluctuations on equity market returns will enhance investor confidence and strengthen the Canadian economy.

The past two decades have provided an interest rate environment that has generally been in decline, with current short‐term rates near zero in most financial markets around the world. This environment puts pressure on insurance firms who generally rely on debt markets to provide returns to fund their future financial obligations and to produce profits for their shareholders. This study examines the impact that the yield curve has on equity returns of Canadian and U.S. insurance companies during the past two decades. Using various measures of the yield curve, U.S. insurers' equity returns tend to have a negative relationship with the yield curve. In the Canadian sample, although the yield curve coefficients are negative and thus directionally align with the U.S. results, there is little statistical significance. Finally, there is additional support for the information diffusion hypothesis and asymmetric impacts of the yield curve on insurers' equity returns.

Sin firms engage in alcohol, tobacco, and game-related business activities. Using a sample of initial public offerings (IPOs), the authors examine the performance of sin and non-sin firm IPOs. The authors find that sin firm IPOs are more underpriced than non-sin firrn IPOs after controlling for pre-issuance firm and issuance characteristics, such as asset size, firm age, lead underwriter's reputation rank, listing exchange, and issuance size, providing further confirming evidence to the shunned-stock hypothesis and reasons for increased interest in alternative investments. The research enriches the current literature on sin firms and IPOs.