The Impact of Circular Economy on Public Equity in Europe. Understanding De-Risking Effect and Risk-Adjusted Performance

A following version was submitted to (Dec 2021) and accepted by (July 2022) Bancaria, Forum section - double blind review -

46 Pages Posted: 13 Dec 2021 Last revised: 29 Jul 2022

See all articles by Claudio Zara

Claudio Zara

Bocconi University - Department of Finance; GREEN Research Centre - Bocconi University

Martina Iannuzzi

Università Bocconi

Shyaam Ramkumar

University of Milan

Date Written: October 8, 2021

Abstract

Circular Economy (CE) offers effective hedging of linear risks, shields financial actors from the risk of stranded values and promises to ensure persistent performance of businesses and portfolios without compromising financial returns. We tested these hypotheses of de-risking (H1) and superior risk-return combinations (H2) building a sample of 222 European circular shares focused on manufacturing, construction, energy and oil & gas industries for the period 2013-2018. We found that securities that score a higher level of circularity confirm both hypothesis, nonetheless as considered standalone or included in the fully diversified portfolio. This research provides the evidence of the positive relation amongst the degree of circularity with equity de-risking and superior risk-adjusted performance coupled with the development of a materiality based measure that quantifies the degree of circularity of a public stock.

Keywords: circular economy, sustainable finance, de-risking effect, risk-adjusted performance, circular metrics, public equity

JEL Classification: G32, G11, Q56, G39

Suggested Citation

Zara, Claudio and Iannuzzi, Martina and Ramkumar, Shyaam, The Impact of Circular Economy on Public Equity in Europe. Understanding De-Risking Effect and Risk-Adjusted Performance (October 8, 2021). A following version was submitted to (Dec 2021) and accepted by (July 2022) Bancaria, Forum section - double blind review - , Available at SSRN: https://ssrn.com/abstract=3938962 or http://dx.doi.org/10.2139/ssrn.3938962

Claudio Zara (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

GREEN Research Centre - Bocconi University ( email )

via Roetgen 1
Milano, Milano 20136
Italy

HOME PAGE: http://https://www.green.unibocconi.eu/wps/wcm/connect/cdr/green/home/

Martina Iannuzzi

Università Bocconi ( email )

Shyaam Ramkumar

University of Milan ( email )

via Festa del Perdono, 7
Milano
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
212
Abstract Views
1,050
Rank
274,644
PlumX Metrics