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Zero-investment Portfolio Strategy and Excess Returns in ESG100 Stocks

In: Comparative Analysis of Trade and Finance in Emerging Economies

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  • Parichat Sinlapates
  • Thawaree Chinnasaeng

Abstract

This study aims to investigate whether the zero-investment portfolio strategy generates higher excess returns for all listed companies in the Stock Exchange of Thailand (SET) or ESG100 stocks. The study period is from January 2016 to December 2020, a total of 60 months. The dividend yield is employed for categorizing the stock into value and growth stocks. The strategy of buying value stocks and short-selling growth stocks is then applied. The results show that investing using the zero-investment portfolio strategy can generate higher returns in an investment portfolio that consists of ESG100 stocks than in an investment portfolio that consists of all stocks in the SET. The optimal holding periods for investing in portfolios that consist of stocks in the SET are 6 months, 9 months, and 12 months, and the optimal holding periods for a portfolio that consists of ESG100 stocks is 6 months. To explain excess returns of stocks in the SET, theFama and French (2015) five-factor model is employed. There is no relation between risk factors and excess returns for the holding period of 6 months and 12 months. However, excess return is found to have a negative relation with the market risk premium factor for a 9-month holding period. The excess returns of ESG100 stocks are also inversely correlated with investment factors for a holding period of 6 months.

Suggested Citation

  • Parichat Sinlapates & Thawaree Chinnasaeng, 2023. "Zero-investment Portfolio Strategy and Excess Returns in ESG100 Stocks," International Symposia in Economic Theory and Econometrics, in: Comparative Analysis of Trade and Finance in Emerging Economies, volume 31, pages 51-66, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620230000031007
    DOI: 10.1108/S1571-038620230000031007
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    More about this item

    Keywords

    Trading strategy; holding period; ESG100 stocks; zero investment portfolio strategy; excess returns; G1; G11;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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