ESG and the market return

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...

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Main Authors:	CHANG, Ran, CHU, Liya, Jun TU, ZHANG, Bohui, ZHOU, Guofu
格式:	text
語言:	English
出版:	Institutional Knowledge at Singapore Management University 2021
主題:	ESG Return Predictability Partial Least Square Elastic Net Out-of-sample Forecast Finance and Financial Management Portfolio and Security Analysis
在線閱讀:	https://ink.library.smu.edu.sg/lkcsb_research/6899 https://ink.library.smu.edu.sg/context/lkcsb_research/article/7898/viewcontent/SSRN_id3869272.pdf
標簽:	添加標簽沒有標簽, 成為第一個標記此記錄!
機構:	Singapore Management University
語言:	English

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總結:	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 using the PLS method, its predictability is robust to using alternative machine learning tools. We find further that the aggregate of environmental variables captures short-term forecasting power, while that of social or governance captures long-term. The predictive power of the ESG index stems from both cash flow and discount rate channels.

ESG and the market return

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