ESG and the market return

• Main Authors: CHANG, Ran, CHU, Liya, Jun TU, ZHANG, Bohui, ZHOU, Guofu
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: ESG; Return Predictability; Partial Least Square; Elastic Net; Out-of-sample Forecast; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6899; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7898/viewcontent/SSRN_id3869272.pdf
• Institution: Singapore Management University

We propose an environmental, social, and governance (ESG) index. We find that it has significant power in predicting the stock market risk premium, both in- and out-of-sample, and delivers sizable economic gains for mean-variance investors in asset allocation. Although the index is extracted by usin...