Related papers: ESG-Valued Portfolio Optimization and Dynamic Asse…
Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environmental and social sustainability, i.e. environmental,…
Sustainable Investing identifies the approach of investors whose aim is twofold: on the one hand, they want to achieve the best compromise between portfolio risk and return, but they also want to take into account the sustainability of…
Environmental, Social, and Governance (ESG) finance is a cornerstone of modern finance and investment, as it changes the classical return-risk view of investment by incorporating an additional dimension of investment performance: the ESG…
We systematically investigate the links between price returns and Environment, Social and Governance (ESG) scores in the European equity market. Using interpretable machine learning, we examine whether ESG scores can explain the part of…
The widespread confusion among investors regarding Environmental, Social, and Governance (ESG) rankings assigned by rating agencies has underscored a critical issue in sustainable investing. To address this uncertainty, our research has…
We investigate the portfolio frontier and risk premia in equilibrium when institutional investors aim to minimize the tracking error variance under an ESG score mandate. If a negative ESG premium is priced in the market, this mandate can…
We designed a machine learning algorithm that identifies patterns between ESG profiles and financial performances for companies in a large investment universe. The algorithm consists of regularly updated sets of rules that map regions into…
In this article, we present a novel approach for the construction of an environment-friendly green portfolio using the ESG ratings, and application of the modern portfolio theory to present what we call as the ``green efficient frontier''…
Portfolio optimization involves determining the optimal allocation of portfolio assets in order to maximize a given investment objective. Traditionally, some form of mean-variance optimization is used with the aim of maximizing returns…
ESG-aware portfolio optimization is increasingly important for sustainable capital allocation, yet most learning-based methods still operationalize ESG by appending static scores to the policy observation or reward. This creates a mismatch…
Financial experts and analysts seek to predict the variability of financial markets. In particular, the correct prediction of this variability ensures investors successful investments. However, there has been a big trend in finance in the…
I identify a new signaling channel in ESG research by empirically examining whether environmental, social, and governance (ESG) investing remains valuable as large institutional investors increasingly shift toward artificial intelligence…
Socially responsible investors build investment portfolios intending to incite social and environmental advancement alongside a financial return. Although Mean-Variance (MV) models successfully generate the highest possible return based on…
We consider option pricing using replicating binomial trees, with a two fold purpose. The first is to introduce ESG valuation into option pricing. We explore this in a number of scenarios, including enhancement of yield due to trader…
This paper proposes an algorithmic trading framework integrating Environmental, Social, and Governance (ESG) ratings with a pairs trading strategy. It addresses the demand for socially responsible investment solutions by developing a unique…
Environmental, Social, and Governance (ESG) data provides non-financial insights into corporations. In this study, we aim to identify relevant ESG raw variables to assess financial risk, measured by logarithmic volatility of return. We…
Incorporating environmental, social, and governance (ESG) considerations into systematic investments has drawn numerous attention recently. In this paper, we focus on the ESG events in financial news flow and exploring the predictive power…
This paper investigates the impact of environmental, social, and governance (ESG) constraint on a regularized mean-variance (MV) portfolio optimization problem in a large-dimensional setting, in which a positive definite regularization…
Environmental Social Governance (ESG) is a widely used metric that measures the sustainability of a company practices. Currently, ESG is determined using self-reported corporate filings, which allows companies to portray themselves in an…
This paper proposes an expected multivariate utility analysis for ESG investors in which green stocks, brown stocks, and a market index are modeled in a one-factor, CAPM-type structure. This setting allows investors to accommodate their…