Corvinus
Corvinus

A Factor Approach to the Performance of ESG Leaders and Laggards

Naffa, Helena ORCID: https://orcid.org/0000-0003-4284-1601 and Fain, Máté ORCID: https://orcid.org/0000-0002-4828-5880 (2021) A Factor Approach to the Performance of ESG Leaders and Laggards. Finance Research Letters . DOI https://doi.org/10.1016/j.frl.2021.102073

[img]
Preview
PDF - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
1MB

Official URL: https://doi.org/10.1016/j.frl.2021.102073


Abstract

We introduce a factor approach to performance measurement of global ESG equity investments. We construct ESG pure factor portfolios (PFP) following Fama-MacBeth; then, applying Fama-French (FF) spanning regressions that simultaneously test performance and the validity of adding new ESG factors to the FF 5-factor model. To address endogeneity, we use a GMM-IV estimator. Our ESG portfolios do not generate significant alphas during 2015-2019, corroborating the literature's neutrality argument. We find no sufficient evidence for ESG factors to complement FF5. PFPs, nevertheless, may serve as ESG indices to quantify investment portfolio sustainability risks via performance attribution of the ESG factor tilt.

Item Type:Article
Uncontrolled Keywords:sustainable investing, ESG, performance measurement, pure factor portfolios, sustainability risks, GMM-IVd method
JEL classification:G11 - Portfolio Choice; Investment Decisions
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G15 - International Financial Markets
Subjects:Finance
DOI:https://doi.org/10.1016/j.frl.2021.102073
ID Code:6431
Deposited By: MTMT SWORD
Deposited On:23 Apr 2021 13:55
Last Modified:23 Apr 2021 14:41

Repository Staff Only: item control page

Downloads

Downloads per month over past year

View more statistics