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Time-varying preferences for ESG investments: evidence from an emerging market

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  • Eunyoung Cho

Abstract

- This paper aims to examine the time-varying preferences for environment, social and corporate governance (ESG) investing in an emerging market. The investors seek ESG-conscious investments during a positive economic outlook, reflecting the time-varying nature of ESG demand. Specifically, the author shows that high-ESG stocks have negative abnormal returns during bad economic times but turn into positive abnormal returns in good economic times. The author also suggests that the alpha spread between high-ESG and low-ESG stocks is larger in good economic times than in bad times. Furthermore, individual investors prefer high ESG scoring stocks in good economic times. The author highlights that this ESG premium is shaped by economic projection and the households' financial wealth.

Suggested Citation

  • Eunyoung Cho, 2023. "Time-varying preferences for ESG investments: evidence from an emerging market," Journal of Derivatives and Quantitative Studies: 선물연구, Emerald Group Publishing Limited, vol. 31(2), pages 121-138, March.
    • Handle: RePEc:eme:jdqspp:jdqs-11-2022-0025
    DOI: 10.1108/JDQS-11-2022-0025
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    More about this item

    Keywords

    ESG; Time-varying preference; Social responsibility; Economic projection; Emerging markets; G11; G40;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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