Corporate Sustainability in Asset Pricing Models and Mutual Funds Performance Measurement

Financial Markets and Portfolio Management, Vol. 28, Issue 4, 2014

Posted: 27 Dec 2015

See all articles by Thomas John Walker

Thomas John Walker

Concordia University, Quebec - Department of Finance

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Thomas Kaspereit

Universite du Luxembourg

Date Written: December 24, 2015

Abstract

This study explores whether corporate sustainability is a relevant factor in multi-factor asset pricing models. It contributes to finance literature on asset pricing as well as literature that examines how sustainability impacts the capital markets by constructing a new factor which 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 the 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 by disentangling general stock picking skills from the differences in returns between sustainable and non-sustainable stocks.

Keywords: Asset Pricing, Corporate Sustainability, Factor Models, Mutual Funds, Performance

JEL Classification: C15, C18, C52, Q01

Suggested Citation

Walker, Thomas John and Lopatta, Kerstin and Kaspereit, Thomas, Corporate Sustainability in Asset Pricing Models and Mutual Funds Performance Measurement (December 24, 2015). Financial Markets and Portfolio Management, Vol. 28, Issue 4, 2014, Available at SSRN: https://ssrn.com/abstract=2708106

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Thomas Kaspereit (Contact Author)

Universite du Luxembourg ( email )

Université du Luxembourg
Campus Limpertsberg,
Luxembourg, 1511
Luxembourg

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