ESG Uncertainty and Stock Returns in Europe
Master thesis
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Date
2023Metadata
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- Master of Science [1822]
Abstract
In this paper we analyze whether ESG uncertainty can predict stock returns by
studying the 3000 largest common stocks within Europe. We observe a tendency of
predictability between ESG uncertainty in the aggregated ESG score and future stock
returns, but no significant premium when controlling for known risk factors.
However, the average ESG rating seems to be a more important predictor of stock
returns, as the environmental dimension yields a premium from stocks with low ESG
ratings also after controlling for known risk factors. We observe that in general,
companies with higher book-to-market values and high volatility stocks have greater
ESG uncertainty while firms with higher market capitalization and leverage have the
opposite effect. Accordingly, we observe that firm characteristics are an important
attribute to consider when examining the disagreement among ESG providers.
Description
Masteroppgave(MSc) in Master of Science in Sustainable finance - Handelshøyskolen BI, 201..