  We explore the realized alpha-performance heterogeneity in green and brown
stocks' universes using the peer performance ratios of Ardia and Boudt (2018).
Focusing on S&P 500 index firms over 2014-2020 and defining peer groups in
terms of firms' greenhouse gas emission levels, we find that, on average, about
20% of the stocks differentiate themselves from their peers in terms of future
performance. We see a much higher time-variation in this opportunity set within
brown stocks. Furthermore, the performance heterogeneity has decreased over
time, especially for green stocks, implying that it is now more difficult for
investment managers to deploy their skills when choosing among low-GHG
intensity stocks.
