ESG controversy as a potential asset-pricing factor

Jeongseok Bang; Doojin Ryu; Robert I. Webb

doi:10.1016/j.frl.2023.104315

ESG controversy as a potential asset-pricing factor

Jeongseok Bang
, Doojin Ryu
, Robert I. Webb

Department of Economics

Sungkyunkwan University
University of Virginia

Research output: Contribution to journal › Article › peer-review

64 Scopus citations

Abstract

We examine whether ESG and ESG controversy scores are pricing factors that systemically affect the risk-return relationship of stocks. We test their additional explanatory power after controlling for other well-known risk factors. ESG controversy risk factor explains the cross-section of stock market returns. Investors exposed to ESG controversies demand a risk premium whereas ESG risk is regarded as idiosyncratic.

Original language	English
Article number	104315
Journal	Finance Research Letters
Volume	58
DOIs	https://doi.org/10.1016/j.frl.2023.104315
State	Published - Dec 2023

Keywords

Asset pricing
ESG
ESG controversy
Risk factor
Risk premium

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10.1016/j.frl.2023.104315

Cite this

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title = "ESG controversy as a potential asset-pricing factor",

abstract = "We examine whether ESG and ESG controversy scores are pricing factors that systemically affect the risk-return relationship of stocks. We test their additional explanatory power after controlling for other well-known risk factors. ESG controversy risk factor explains the cross-section of stock market returns. Investors exposed to ESG controversies demand a risk premium whereas ESG risk is regarded as idiosyncratic.",

keywords = "Asset pricing, ESG, ESG controversy, Risk factor, Risk premium",

author = "Jeongseok Bang and Doojin Ryu and Webb, \{Robert I.\}",

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AU - Ryu, Doojin

AU - Webb, Robert I.

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N2 - We examine whether ESG and ESG controversy scores are pricing factors that systemically affect the risk-return relationship of stocks. We test their additional explanatory power after controlling for other well-known risk factors. ESG controversy risk factor explains the cross-section of stock market returns. Investors exposed to ESG controversies demand a risk premium whereas ESG risk is regarded as idiosyncratic.

AB - We examine whether ESG and ESG controversy scores are pricing factors that systemically affect the risk-return relationship of stocks. We test their additional explanatory power after controlling for other well-known risk factors. ESG controversy risk factor explains the cross-section of stock market returns. Investors exposed to ESG controversies demand a risk premium whereas ESG risk is regarded as idiosyncratic.

KW - Asset pricing

KW - ESG

KW - ESG controversy

KW - Risk factor

KW - Risk premium

UR - https://www.scopus.com/pages/publications/85171688878

U2 - 10.1016/j.frl.2023.104315

DO - 10.1016/j.frl.2023.104315

M3 - Article

AN - SCOPUS:85171688878

SN - 1544-6123

VL - 58

JO - Finance Research Letters

JF - Finance Research Letters

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ER -

ESG controversy as a potential asset-pricing factor

Abstract

Keywords

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