Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287546 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Asset Management [ISSN:] 1479-179X [Volume:] 22 [Issue:] 7 [Publisher:] Palgrave Macmillan UK [Place:] London [Year:] 2021 [Pages:] 600-621
Publisher: 
Palgrave Macmillan UK, London
Abstract: 
Studies show the inconclusive results regarding the relation between corporate social and environmental responsibility (CSR and CER) and expected returns. We argue that the reason for these mixed results is that the sustainability premium (i.e., the return difference of high-intensity minus low-intensity CSR/CER firms) is time-varying and correlated with investor sentiment. We find that high-intensity CSR (CER) firms have a monthly excess return that is 0.70 (0.88) p.p. higher following periods of low investor sentiment as compared to periods of high sentiment. Given that standard pricing factors cannot fully explain the abnormal returns caused by investor sentiment on the sustainability premium, we propose a sustainability pricing factor, estimated as the second principal component of portfolios sorted based on environmental and social variables, which corrects this mispricing.
Subjects: 
Sustainability
Corporate social responsibility
Corporate environmental responsibility
Expected returns
Financial performance
Investor sentiment
JEL: 
G12
G19
G41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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