ESG rating disagreement, volatility, and stock returns

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2024-12-07 DOI:10.1016/j.frl.2024.106602

Qingduo Zeng, Yang Xu, Mengshu Hao, Meiqi Gao

引用次数: 0

Abstract

We present a rational expectation equilibrium model to explore how ESG rating disagreement impacts stock returns. Our findings reveal that high disagreement in ESG rating is associated with high return volatility risk, which potentially leads to increased stock returns. Our empirical results confirm a positive impact of ESG disagreement on stock returns, reinforcing our theoretical findings. The mechanism tests suggest that ESG disagreement enhances stock returns by amplifying idiosyncratic return volatility. Overall, our research sheds light on how ESG disagreement affects stock returns through market microstructure, and offers valuable insights into the role that ESG disagreement plays in ESG investing.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance