Is ESG a Novel Pricing Risk Factor for the Chinese Stock Markets during COVID-19?

作者：Weitao Zhou · 发表于：Advances in Economics Management and Political Sciences · 年份：2023 · DOI：10.54254/2754-1169/3/2022892 · 被引用次数：2 · 研究领域：Market Dynamics and Volatility、Financial Markets and Investment Strategies、COVID-19 Pandemic Impacts

This paper examines the potential of ESG as a novel risk factor, explaining different industry portfolio returns from 2018 to 2021 (including two years of the unique COVID-19 window). The ESG factor(SMU) is designed as the spread between the top 30% high-ESG(Sustainable) group and the bottom 30% low-ESG(Unsustainable) group. Based on empirical evidence from the Chinese stock markets, this paper finds: 1) The ESG factor significantly explains industry returns along with Fama-French three factors; 2) Sustainable portfolios consistently outperform unsustainable groups, particularly during the pandemic period; 3) Modified models with ESG factors slightly outperform the classic FF-3 model according to the GRS F-test; and 4) Industry portfolio returns during COVID-19 are surprisingly higher than in normal times, most likely due to the central bank and government’s Quantitative Easing(QE) policies.