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Is Corporate Social Responsibility investing a free lunch? The relationship between ESG, tail risk, and upside potential of stocks before and during the COVID-19 crisis

Hans Lööf (), Maziar Sahamkhadam () and Andreas Stephan ()
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Maziar Sahamkhadam: Linnaeus University

No 488, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Did Corporate Social Responsibility investing benefit shareholders during the COVID-19 pandemic crisis? Distinguishing between downside tail risk and upside reward potential of stock returns, we provide evidence from 5,073 stocks listed on stock markets in ten countries. The findings suggests that better ESG ratings are associated with lower downside risk, but also with lower upside return potential. Thus, ESG ratings help investors to reduce their risk exposure to the market turmoil caused by the pandemic, while maintaining the fundamental trade-off between risk and reward.

Keywords: ESG; COVID 19; downside risk; upside potential; Sustainalytics; financial markets (search for similar items in EconPapers)
JEL-codes: D22 G11 G14 G32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-05-27
New Economics Papers: this item is included in nep-cwa, nep-fmk and nep-rmg
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Journal Article: Is Corporate Social Responsibility investing a free lunch? The relationship between ESG, tail risk, and upside potential of stocks before and during the COVID-19 crisis (2022) Downloads
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