Graduation Year
2023
Date of Submission
12-2022
Document Type
Open Access Senior Thesis
Award
Robert Day School Prize for Best Senior Thesis in Economics and Finance
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Eric Hughson
Terms of Use & License Information
Rights Information
© 2022 John Wallace
Abstract
In this paper, I estimate the monthly alpha of sin stocks as a means to assess the influence that ESG investors exert on the public equity markets. I hypothesize that the systematic avoidance of sin stocks leads to the outperformance of a broad sin portfolio relative to conventional market benchmarks. Further, given the increase in the proportion of ESG-oriented assets under management in recent years, I hypothesize that the observed alpha in more recent periods exceeds that of prior periods. Consistent with the first plank of my hypothesis, I provide strong evidence for the outperformance of sin stocks over time despite time-varying alpha. Conversely, I find that the alpha in more recent time periods associated with an increase in the proportion of ESG-oriented capital has deteriorated and turned negative, inconsistent with the second plank of my hypothesis. I then propose a theory to explain this divergence in results from my hypothesis.
Recommended Citation
Wallace, John, "The Anti-ESG Equity Premium" (2023). CMC Senior Theses. 3209.
https://scholarship.claremont.edu/cmc_theses/3209
