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
Date Written: December 24, 2015
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: Suggested Citation