ESG, liquidity, and stock returns

Di Luo

doi:10.1016/j.intfin.2022.101526

ESG, liquidity, and stock returns

Di Luo

Research output: Contribution to journal › Article › peer-review

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Abstract

We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.

Original language	English
Article number	101526
Number of pages	21
Journal	Journal of International Financial Markets, Institutions and Money
Volume	78
Early online date	22 Feb 2022
DOIs	https://doi.org/10.1016/j.intfin.2022.101526
Publication status	Published - May 2022

Keywords

ESG
Stock returns
Liquidity

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10.1016/j.intfin.2022.101526Licence: CC BY

Final published versionFinal published version, 1.12 MBLicence: CC BY

Cite this

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abstract = "We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.",

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AB - We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.

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ESG, liquidity, and stock returns

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Keywords

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