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Investment strategy using Adjusted ESG rating: Focusing on a Korean Market

Eunchong KIM|Hanwook JEONG
한국유통과학회 (Korea Distribution Science Association)|2022.01|산경연구논집 (The Journal of Industrial Distribution & Business)|제13권 제1호|pp. 23-33

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키워드

investment strategyESGOptimizationMultifactor

초록

Purpose: This study used ESG grade, but defined AESG (Adjusted ESG), adjusted to the size of a company and examines whether it can be used as an investment strategy. Research design, data and methodology: The analysis sample in this study is a company that has given an ESG rating among companies listed on the Korea Stock Exchange. We examine the results through portfolio analysis and Fama-macbeth regression analysis. Results: As result of examining the long-only performance and the long-short performance by constructing quintile portfolios, it was observed that a significant positive return was shown. It was observed that there was an alpha that could not be explained in asset pricing models. Also, AESG had a return prediction effect in the result of a Fama-Macbeth regression that controlled corporate characteristic variables in individual stocks. Next, we confirmed AESG’s usage through various portfolio composition. In the portfolio optimization, the Risk Efficient method was the most superior in terms of sharpe ratio and the construct multi-factor model with Value, Momentum and Low Vol showed statistically significant performance improvement. Conclusions: The results of this study suggest that it can be helpful in ESG investment to reflect the ESG rating of relatively small companies more through the scale adjustment of the ESG rating (i.e.AESG).

Abstract

Purpose: This study used ESG grade, but defined AESG (Adjusted ESG), adjusted to the size of a company and examines whether it can be used as an investment strategy. Research design, data and methodology: The analysis sample in this study is a company that has given an ESG rating among companies listed on the Korea Stock Exchange. We examine the results through portfolio analysis and Fama-macbeth regression analysis. Results: As result of examining the long-only performance and the long-short performance by constructing quintile portfolios, it was observed that a significant positive return was shown. It was observed that there was an alpha that could not be explained in asset pricing models. Also, AESG had a return prediction effect in the result of a Fama-Macbeth regression that controlled corporate characteristic variables in individual stocks. Next, we confirmed AESG’s usage through various portfolio composition. In the portfolio optimization, the Risk Efficient method was the most superior in terms of sharpe ratio and the construct multi-factor model with Value, Momentum and Low Vol showed statistically significant performance improvement. Conclusions: The results of this study suggest that it can be helpful in ESG investment to reflect the ESG rating of relatively small companies more through the scale adjustment of the ESG rating (i.e.AESG).

참고문헌 (42)

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관련 논문AI추천

ESG 등급 변화를 이용한 책임투자전략 연구강윤식, 윤보현, 이영준경영경제연구소 · 아태비즈니스연구2022 · 제13권 제4호ESG 등급을 활용한 팩터 투자방안에 관한 연구김은총, 정한욱경영경제연구소 · 경영경제연구2020 · 제42권 제4호ESG가 자산가격결정에 미치는 영향에 대한 연구이동엽, 이상기, 홍정훈한국금융정보학회 · 금융정보연구2022 · 제11권 제3호Price Impact of ESG Scores: Evidence from Korean Retail Firms손삼호, 이정환한국유통과학회 · 유통과학연구2019 · 제17권 제7호An Empirical Analysis on Performance Inconsistency among Environmental, Social and Governance Components of ESG Ratings박민정경영경제연구소 · 아태비즈니스연구2024 · 제15권 제1호ESG 투자배제전략의 성과분석조은영한국재무관리학회 · 재무관리연구2022 · 제39권 제6호

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