The role of ESG factor in stock clustering based on risk-return-liquidity dimensions

Lucie Staněk Gyönyör, Matúš Horváth, Daniel Stašek and Martin Stachoň

The North American Journal of Economics and Finance, 2025, vol. 76, issue C

Abstract: ESG stocks exhibit discernible attributes that encompass both financial and non-financial considerations. Our study examines whether ESG stocks provide unique characteristics in terms of return, risk, and liquidity. We use a multivariate statistical approach to analyze the ESG ratings of S&P 1200 stocks from seven major data providers and their structural combinations. The findings indicate the absence of a general systematic effect over seven consecutive years. Still, unidimensional scores, particularly Governance, demonstrate greater significance compared to multidimensional indicators, suggesting the financial importance of core ESG information and its usefulness in financial decision-making. Besides, we discuss the effect of specific events and investors’ understanding of ESG scores’ representation. Although the article argues for a substantial overlap between traditional financial analysis and the core features of the Governance dimension, ESG may not emerge as a dominant factor in stock clustering and, thus, cannot be recognized as a separate sub-asset class indicator.

Keywords: ESG; Classification; Sustainability; SRI; Cluster analysis (search for similar items in EconPapers)
JEL-codes: G12 G19 M14 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:76:y:2025:i:c:s1062940824002754

DOI: 10.1016/j.najef.2024.102350

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