ESG and Aggregate Disagreement

Di Luo (Lead / Corresponding author), Hisham Farag

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This paper investigates the role of aggregate disagreement in the relationship between environmental, social, and governance (ESG) scores and future stock returns in the United States (US), European Union (EU), and United Kingdom (UK). We find that firms with high ESG scores are likely to have higher exposure to aggregate disagreement than firms with low ESG scores because of the divergence of opinions about long-term earnings growth. Consistent with our conjecture, the results suggest that when aggregate disagreement is high, a profitable trading strategy is to long firms with low ESG scores and to short those with higher ESG scores. Our results have clear implications for the growing debate over ESG investment strategies.
Original languageEnglish
Article number101972
Number of pages15
JournalJournal of International Financial Markets, Institutions and Money
Early online date23 Mar 2024
Publication statusPublished - Apr 2024


  • ESG
  • Stock returns
  • Aggregate disagreement


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