Essays on Contagion, Climate, and Green Finance

This thesis studies how financial markets process risk, information, and institutional responses to systemic challenges. It brings together three essays that examine distinct mechanisms through which capital is allocated in the face of uncertainty. These include sudden health crises, persistent climate risks, and the emergence of new public financial institutions that aim to steer private investment. While the first two chapters focus on market responses to informational shocks, the third chapter investigates a structural evolution in financial intermediation. The first chapter, When the Markets Get C.O.V.I.D., analyzes how global financial markets respond to the emergence and diffusion of pandemic-related news. Using high-frequency data on over 15,000 COVID-19 medical announcements and real-time Twitter-based news diffusion across countries, the paper documents significant asset price reactions to contagion information. It shows that both equity and bond markets price contagion risk, and that exposure to pandemic news can explain heterogeneity in returns across countries and sectors. A high-frequency no-arbitrage model with time-varying betas formalizes the risk-premium implications of these findings. The second chapter, International Climate News, turns to climate-related information as a priced risk factor in international financial markets. It introduces novel country-level indices of climate attention based on more than 23 million newspaper tweets collected across 25 countries. The empirical analysis shows that countries with greater exposure to global climate news experience currency appreciation, capital inflows, and persistent underperformance of high-emission (“brown”) stocks. A dynamic international model incorporating priced climate news shocks and heterogeneous country exposure explains these results by linking climate attention to exchange rate movements and capital reallocations. The third chapter, The Rise of Green Banks, focuses on institutional design and financial behavior in the domestic climate finance space. Green Banks are nonprofit or quasi-public financial institutions that mobilize private capital for clean energy investments by offering co-financing, guarantees, and concessional loans. Using a novel hand-collected dataset of project-level activity across U.S. Green Banks, the chapter provides the first empirical study of how these institutions deploy capital, interact with traditional lenders, and target disadvantaged communities. It also introduces a theoretical model in which a Green Bank faces leverage constraints and coordination frictions when co-investing with private institutions. The model generates testable predictions about public-private capital structuring and the distributional consequences of climate investment. Together, these three chapters reflect a broader research agenda focused on how capital markets react to risk and how institutional responses shape those reactions. From pricing pandemic and climate information to analyzing the financial behavior of emerging public intermediaries, the thesis provides new evidence on how risk, policy, and capital allocation interact in an increasingly uncertain and climate-constrained world.