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Corporate sustainability in asset pricing models and mutual funds performance measurement

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  • Thomas Walker
  • Kerstin Lopatta
  • Thomas Kaspereit

Abstract

This study explores whether corporate sustainability is a relevant factor in multifactor asset pricing models. It contributes to the literature on asset pricing, as well as to the literature that examines how sustainability impacts capital markets, by constructing a new factor that captures differences in the returns of sustainable and non-sustainable firms. Specifically, it examines whether an additional sustainability factor has explanatory power in asset pricing models that include size, book-to-market equity, and momentum factors. This research has practical implications for the performance measurement of portfolios and mutual funds that are managed in accordance with sustainability criteria in that it disentangles general stock-picking skills from the differences in returns between sustainable and non-sustainable stocks. Copyright Swiss Society for Financial Market Research 2014

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  • Thomas Walker & Kerstin Lopatta & Thomas Kaspereit, 2014. "Corporate sustainability in asset pricing models and mutual funds performance measurement," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 28(4), pages 363-407, November.
    • Handle: RePEc:kap:fmktpm:v:28:y:2014:i:4:p:363-407
    DOI: 10.1007/s11408-014-0237-x
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    More about this item

    Keywords

    Asset pricing; Corporate sustainability; Factor models; Mutual funds; Performance measurement; G11; G12;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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