scholarly journals Environmental Portfolios—Evidence from Screening and Passive Portfolio Management

2021 ◽  
Vol 13 (22) ◽  
pp. 12647
Author(s):  
Julian Amon ◽  
Margarethe Rammerstorfer ◽  
Karl Weinmayer
Keyword(s):  
Financial Performance ◽  
Portfolio Management ◽  
Asset Allocation ◽  
Risk Premium ◽  
Factor Model ◽  
Five Factor Model ◽  
Selection Strategy ◽  
Environmental Criteria ◽  
Performance Reduction ◽  
Asset Selection

Environmental portfolios via screening or optimization with respect to ecological criteria are not clear-cut concepts. Often, they urge investors to reduce the asset universe, which is accompanied by diversification losses. In this article, we show that a simple passive asset selection strategy based on environmental criteria allows ecological investors to adjust their portfolios without compromising or even reducing risk-adjusted financial performance. In detail, we show that screening does not lead to a significant financial performance reduction. Moreover, we propose an asset selection based on an environmental criteria that improves the portfolios’ financial performance, and further improves its potential positive environmental impact. Our results suggest that a combination of a screening and an environmental-scoring-based asset allocation seems to be a viable option for environmentally responsible investors leveraging the advantages of both strategies. Furthermore, we construct a risk factor CMP (clean minus polluting) and document a significant factor loading when added to the Fama–French five-factor model, suggesting the existence of a risk premium based on a firm’s environmental performance.

scholarly journals Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

2021 ◽  
Vol 13 (16) ◽  
pp. 9388
Author(s):  
Julian Amon ◽  
Margarethe Rammerstorfer ◽  
Karl Weinmayer
Keyword(s):  
Financial Performance ◽  
Portfolio Management ◽  
Asset Allocation ◽  
Factor Model ◽  
Five Factor Model ◽  
Strong Support ◽  
Socially Responsible ◽  
A Value ◽  
Significant Difference ◽  
The Impact

In this article, we investigate the notion of doing well while doing good from the perspective of passive portfolio strategies. We analyze a number of asset allocation strategies based on ESG-weighting and compare their financial and ESG performance for the US and Europe. We find no significant difference in the financial performance but superior ESG performance of ESG-based strategies. It can be concluded that, compared to a naive strategy, socially responsible investors are willing to pay a small premium for the impact of the portfolio via transaction costs when rebalancing the portfolio according to their preferences for social responsibility. In addition, when comparing the ESG-based strategies to a value-weighted strategy, we observe no significant difference in ESG performance but a high degree of significance in the superior financial performance of the ESG-based strategy. We also analyze the strategies with regards to the factor loadings given by the Fama–French five-factor model and a sixth factor denoted GMB (Good minus Bad) and find significant differences across the regions and strategies. Overall, the results show strong support of ESG-based strategies being preferred by socially responsible investors but also suggest that such strategies might be preferred by conventional investors looking for a passively managed alternative compared to a value-weighted index. Furthermore, it seems that such a strategy might be a more adequate benchmark for active SRI funds.

scholarly journals Testing Multi-Factor Models in ADRs: Emerging Market vs. Developed Market

2020 ◽  
Vol 5 (1) ◽  
pp. 12-21
Author(s):  
Tingting Que ◽  
Wai Yin Mok ◽  
Kit Yee Cheung
Keyword(s):  
Risk Factors ◽  
Risk Premium ◽  
Factor Model ◽  
Five Factor Model ◽  
Emerging Market ◽  
Abnormal Returns ◽  
International Market ◽  
Market Risk Premium ◽  
Developed Markets ◽  
Traditional Risk Factors

This paper tests whether the Carhart four-factor model and the Fama-French five-factor model can explain variation in returns of 1,230 ADRs originating from six developed markets and five emerging markets. We aim to compare emerging market ADRs with developed market ADRs in terms of traditional risk factors significance, model fitness and the existence of abnormal returns. Overall, we find that substantial variations exist among ADRs by their origin-of-market. First, both models show that most of the positive abnormal returns we document accrue to emerging market ADRs, mainly Chinese ADRs. Among the risk factors, market risk premium is found to be most prevalent in both emerging and developed markets. Although we find some difference in the presence of particular risk factors employed in the four-factor vs. five-factor model, overall, there are no significant differences in the explanation power between the two models. Lastly, the low R2 values imply that both models do not work very well with the international market ADRs. 

scholarly journals Cross-Sector Style Analysis Of Global Equities Based On The Fama And French Three-Factor Model

2012 ◽  
Vol 11 (2) ◽  
pp. 161
Author(s):  
Heng-Hsing Hsieh ◽  
Kathleen Hodnett
Keyword(s):  
Portfolio Management ◽  
Risk Premium ◽  
Factor Model ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Risk Premiums ◽  
Portfolio Returns ◽  
Fama And French ◽  
Resource Sector ◽  
Sector Returns

Although the ability of the Fama and French (1993) 3-factor model in explaining style-based portfolio returns have been widely tested, no such test has been conducted on sector-based portfolios. The study conducted by Hsieh and Hodnett (2011) indicate that the resource sector yields significant abnormal returns under the capital asset pricing model (CAPM) over the period from 1999 to 2009. In addition, the book value-to-market ratio and market capitalization are found to have pervasive effects on the pricing of sector returns for global equities. Motivated by this insight, we undertake to test the ability of the Fama and French (1993) 3-factor model in explaining the variations in the global sector returns. Our test results indicate that the market risk premium is the most significant factor that drives the returns in all sectors under review. Although the positive abnormal returns of the resource sector dissipates under the 3-factor model, the industrial sector and the information technology (I.T.) sector yield abnormal returns under the 3-factor model. Unlike the empirical findings on the style portfolios, the signs and statistical significance of the exposures to the value and size risk premiums are not consistent across all sectors. This finding suggests that sector exposures are more unique and distinctive compared to the style portfolios. It could be argued that since most of the style portfolios are directly related to the value and size anomalies, any factor model that incorporates risk premiums on these anomalies would significantly explain the style portfolio returns. However, the ability of such factor model in explaining returns on portfolios formed using methodologies other than style anomalies, such as sector portfolio returns, would be questionable. Taking into account the rising global integration, sector allocation might be more effective in terms of global active portfolio management or international diversification than style allocation and country allocation.

scholarly journals Time-Varying Coefficient Estimation in SURE Models. Application to Portfolio Management*

2019 ◽  
Author(s):  
Isabel Casas ◽  
Eva Ferreira ◽  
Susan Orbe
Keyword(s):  
Portfolio Management ◽  
Factor Model ◽  
Five Factor Model ◽  
Asymptotic Properties ◽  
Seemingly Unrelated Regression ◽  
Regression Equations ◽  
Time Varying ◽  
Varying Coefficients ◽  
Time Varying Coefficients ◽  
Fama And French

Abstract This paper provides a detailed analysis of the asymptotic properties of a kernel estimator for a seemingly unrelated regression equations model with time-varying coefficients (tv-SURE) under general conditions. Theoretical results together with a simulation study differentiate the cases for which the estimation of a tv-SURE outperforms the estimation of a single regression equations model with time-varying coefficients. The study shows that Zellner’s results cannot be straightforwardly extended to the time-varying case. The tv-SURE is applied to the Fama and French five-factor model using data from four different international markets. Finally, we provide the estimation under cross-restriction and discuss a testing procedure.

scholarly journals Examination and Modification of Multi-Factor Model in Explaining Stock Excess Return with Hybrid Approach in Empirical Study of Chinese Stock Market

2019 ◽  
Vol 12 (2) ◽  
pp. 91
Author(s):  
Jian Huang ◽  
Huazhang Liu
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Empirical Study ◽  
Risk Premium ◽  
Stock Price ◽  
Factor Model ◽  
Five Factor Model ◽  
Hybrid Approach ◽  
Chinese Stock Market ◽  
Cyclical Pattern

To search significant variables which can illustrate the abnormal return of stock price, this research is generally based on the Fama-French five-factor model to develop a multi-factor model. We evaluated the existing factors in the empirical study of Chinese stock market and examined for new factors to extend the model by OLS and ridge regression model. With data from 2007 to 2018, the regression analysis was conducted on 1097 stocks separately in the market with computer simulation based on Python. Moreover, we conducted research on factor cyclical pattern via chi-square test and developed a corresponding trading strategy with trend analysis. For the results, we found that except market risk premium, each industry corresponds differently to the rest of six risk factors. The factor cyclical pattern can be used to predict the direction of seven risk factors and a simple moving average approach based on the relationships between risk factors and each industry was conducted in back-test which suggested that SMB (size premium), CMA (investment growth premium), CRMHL (momentum premium), and AMLH (asset turnover premium) can gain positive return.

Social Desirability in Personality Inventories

2014 ◽  
Vol 35 (3) ◽  
pp. 144-157 ◽  
Author(s):  
Martin Bäckström ◽  
Fredrik Björklund
Keyword(s):  
Social Desirability ◽  
Big Five ◽  
Work Performance ◽  
Factor Model ◽  
Five Factor Model ◽  
Peer Ratings ◽  
Personality Inventories ◽  
Model Study ◽  
The Difference ◽  
New Variables

The difference between evaluatively loaded and evaluatively neutralized five-factor inventory items was used to create new variables, one for each factor in the five-factor model. Study 1 showed that these variables can be represented in terms of a general evaluative factor which is related to social desirability measures and indicated that the factor may equally well be represented as separate from the Big Five as superordinate to them. Study 2 revealed an evaluative factor in self-ratings and peer ratings of the Big Five, but the evaluative factor in self-reports did not correlate with such a factor in ratings by peers. In Study 3 the evaluative factor contributed above the Big Five in predicting work performance, indicating a substance component. The results are discussed in relation to measurement issues and self-serving biases.

Construction and Validation of a Short Adjectives Checklist to Measure Big Five (SACBIF)

1996 ◽  
Vol 12 (1) ◽  
pp. 33-42 ◽  
Author(s):  
Marco Perugini ◽  
Luigi Leone
Keyword(s):  
Construct Validity ◽  
Psychometric Properties ◽  
Big Five ◽  
Factor Model ◽  
Five Factor Model ◽  
Selection Procedure ◽  
Factorial Structure ◽  
Personality Dimensions

The aim of this contribution is to present a new short adjective-based measure of the Five Factor Model (FFM) of personality, the Short Adjectives Checklist of BIg Five (SACBIF). We present the various steps of the construction and the validation of this instrument. First, 50 adjectives were selected with a selection procedure, the “Lining Up Technique” (LUT), specifically used to identify the best factorial markers of the FFM. Then, the factorial structure and the psychometric properties of the SACBIF were investigated. Finally, the SACBIF factorial structure was correlated with some main measures of the FFM to establish its construct validity and with some other personality dimensions to investigate how well these dimensions could be represented in the SACBIF factorial space.

Factorial Invariance of Child Self-Report Across English and Spanish Language Groups in a Hispanic Population Utilizing the PedsQL™ 4.0 Generic Core Scales

2010 ◽  
Vol 26 (3) ◽  
pp. 194-202 ◽  
Author(s):  
Daniel A. Newman ◽  
Christine A. Limbers ◽  
James W. Varni
Keyword(s):  
Health Care Services ◽  
Factor Model ◽  
Five Factor Model ◽  
Well Being ◽  
Factorial Invariance ◽  
Spanish Language ◽  
Self Report ◽  
Hispanic Population ◽  
Language Groups ◽  
Related Quality

The measurement of health-related quality of life (HRQOL) in children has witnessed significant international growth over the past decade in an effort to improve pediatric health and well-being, and to determine the value of health-care services. In order to compare international HRQOL research findings across language groups, it is important to demonstrate factorial invariance, i.e., that the items have an equivalent meaning across the language groups studied. This study examined the factorial invariance of child self-reported HRQOL across English- and Spanish-language groups in a Hispanic population of 2,899 children ages 8–18 utilizing the 23-item PedsQL™ 4.0 Generic Core Scales. Multigroup confirmatory factor analysis (CFA) was performed specifying a five-factor model across language groups. The findings support an equivalent 5-factor structure across English- and Spanish-language groups. Based on these data, it can be concluded that children across the two languages studied interpreted the instrument in a similar manner. The multigroup CFA statistical methods utilized in the present study have important implications for cross-cultural assessment research in children in which different language groups are compared.

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