ESG factors and the cross-section of expected stock returns: A LASSO-based approach

Jeongseok Bang and Doojin Ryu

Finance Research Letters, 2024, vol. 65, issue C

Abstract: We analyze high-dimensional factor data in the U.S. market to examine whether the ESG (environmental, social, and governance) factors help explain the cross-section of expected stock returns. To avoid omitted variable biases, we use the double-selection LASSO approach with more than 160 risk factors. ESG and environmental factors potentially explain the cross-section of stock returns and can also affect investors’ marginal utility.

Keywords: Esg; Factor zoo; Lasso; Machine learning; Stock market (search for similar items in EconPapers)
JEL-codes: G12 M14 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324005129

DOI: 10.1016/j.frl.2024.105482

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