Template-Type: ReDIF-Article 1.0

Author-Name: Barnabas Timar
Author-Workplace-Name: Corvinus University of Budapest
Author-Email: barnabas.timar@stud.uni-corvinus.hu


Title: How Does the Market Price Responsible and Sustainable Investments?

Abstract: In my study, I investigate whether it is possible to prove the hypothesis that investing in
responsible, sustainable companies can be financially more rewarding from the
perspective of investors, i.e. can result in higher profit than investing in companies that
ignore these aspects. My further assumption is that this profit can be increased if I apply
different restrictions or relative scores. I tested my hypotheses empirically on data from
the New York Stock Exchange, both on investment strategies (portfolio creation) and at
stock level (regression). I performed the tests for the total market, in detailed industry
breakdowns and groupings as well. I tested the examined indicators (ESG, ENV) in
isolation and with a relative approach, over several time horizons. For most of the tests,
I obtained non-significant results; for some industries a minor negative impact can be
seen, and for the regressions I obtained coefficients that are significant, but of
negligible economic significance. Temporal decomposition shows the increasing
significance of ESG and ENV, but even for the later time series it is not considered
significant. The results suggest that the aspects under investigation are not yet priced
by the market, so my hypotheses were not confirmed. This could be due to the
greenwashing phenomenon or the developed US market.

Classification-JEL: G17, G32, G41
Keywords: Fama-French, ESG, ENV, environmental protection, factor, sustainability, return, US, stock exchange
Pages: 117-147
Volume: 20
Issue: 2
Year: 2021
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-2-st5-timar.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:20:y:2021:i:2:p:117-147