{"title":"ESG and aggregate disagreement","authors":"Di Luo , Hisham Farag","doi":"10.1016/j.intfin.2024.101972","DOIUrl":null,"url":null,"abstract":"<div><p>This paper investigates the role of aggregate disagreement in the relationship between environmental, social, and governance (<span><math><mi>ESG</mi></math></span>) scores and future stock returns in the United States (US), European Union (EU), and United Kingdom (UK). We find that firms with high <span><math><mi>ESG</mi></math></span> scores are likely to have higher exposure to aggregate disagreement than firms with low <span><math><mi>ESG</mi></math></span> scores because of the divergence of opinions about long-term earnings growth. Consistent with our conjecture, the results suggest that when aggregate disagreement is high, a profitable trading strategy is to long firms with low <span><math><mi>ESG</mi></math></span> scores and to short those with higher <span><math><mi>ESG</mi></math></span> scores. Our results have clear implications for the growing debate over <span><math><mi>ESG</mi></math></span> investment strategies.</p></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":null,"pages":null},"PeriodicalIF":5.4000,"publicationDate":"2024-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1042443124000386/pdfft?md5=9e2a488f30b40b692661e9f2119592eb&pid=1-s2.0-S1042443124000386-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Financial Markets Institutions & Money","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042443124000386","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper investigates the role of aggregate disagreement in the relationship between environmental, social, and governance () scores and future stock returns in the United States (US), European Union (EU), and United Kingdom (UK). We find that firms with high scores are likely to have higher exposure to aggregate disagreement than firms with low scores because of the divergence of opinions about long-term earnings growth. Consistent with our conjecture, the results suggest that when aggregate disagreement is high, a profitable trading strategy is to long firms with low scores and to short those with higher scores. Our results have clear implications for the growing debate over investment strategies.
期刊介绍:
International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.