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SUMMARY:ESG Confusion and Stock Returns: Tackling the Problem of Noise.
DTSTART:20220121T103000
DTEND:20220121T114500
DTSTAMP:20260916T003930Z
UID:26328136098a184630bcb90b3a957cb750f608bb8b5f1f4739090d34
CATEGORIES:Conferences - Seminars
DESCRIPTION:Anna Pavlova\, LBS\nHow strongly does ESG (environmental\, soc
 ial and governance) performance affect stock returns? Answering this quest
 ion is difficult because existing measures of performance\, ESG ratings\, 
 are noisy. To tackle the bias\, we propose a noise-correction procedure\, 
 in which we instrument ESG ratings with ratings of other ESG rating agenci
 es\, as in the classical errors-in-variables problem. The corrected estima
 tes demonstrate that the effect of ESG performance on stock returns is str
 onger than previously estimated\; the standard regression estimates of ESG
  ratings' impact on stock returns are biased downward by about 60%. Our da
 taset includes scores of eight ESG rating agencies for firms located in No
 rth America\, Europe\, and Japan. We determine which agencies’ scores ar
 e valid instruments (not all of them are) and estimate the noise-to-signal
  ratio for each ESG rating agency (some of which are very large). Overall\
 , our results suggest that it is advantageous to rely on several complemen
 tary ratings. In our sample\, stocks with higher ESG performance have high
 er expected returns. Our model provides several explanations for this find
 ing.\n\nPaper: ESG Confusion and Stock Returns: Tackling the Problem of No
 ise by Florian Berg\, Julian F Kölbel\, Anna Pavlova\, Roberto Rigobon ::
  SSRN
LOCATION:Zoom
STATUS:CONFIRMED
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