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Portfolio performance and environmental risk

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  • Olsson, Rickard

    ()
    (UmeƄ School of Business)

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    Abstract

    This paper examines the performance of US stock portfolios constructed and rebalanced to have different environmental (EV) risk. EV risk is proxied by EV risk ratings from GES Investment Services. Portfolios with high EV risk generate higher raw returns than low EV risk portfolios, but when risk and other factors are controlled for using the three Fama-French factors and a momentum factor, the risk-adjusted returns of both high and low EV risk portfolios are not statistically different from zero. The evidence thus indicate that a portfolio of stocks with low EV risk, intended to be more responsible, neither underperform or outperform on a risk-adjusted basis.

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    File URL: http://web.abo.fi/fak/esf/fei/redovisa/kurser/Lasse/Mistra%20wp/sirp%20wp%2007-04%20-%20olsson.pdf
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    Bibliographic Info

    Paper provided by Sustainable Investment Research Platform in its series Sustainable Investment and Corporate Governance Working Papers with number 2007/4.

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    Length: 6 pages
    Date of creation: 24 Nov 2007
    Date of revision:
    Handle: RePEc:hhb:sicgwp:2007_004

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    Postal: Economics of Corporate Sustainability Management, Department of Industrial Economics and Management, Royal Institute of Technology, SE-100 44 Stockholm, SWEDEN
    Phone: 08-790 78 61
    Fax: 08-790 76 17
    Web page: http://www.sirps.se
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    Related research

    Keywords: Socially responsible investment; environmental risk; portfolio performance evaluation;

    This paper has been announced in the following NEP Reports:

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    1. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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