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  • An empirical study of the world price of sustainability

    Author(s)
    Xiao, Yuchao
    Faff, Robert W.
    Gharghori, Philip
    Lee, Darren D.
    Griffith University Author(s)
    Lee, Darren
    Year published
    2013
    Metadata
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    Abstract
    The core goal of this study is to empirically investigate whether there is a “world price” of corporate sustainability. This is assessed in the context of standard asset pricing models—in particular, by asking whether a risk premium attaches to a sustainability factor after controlling for the Fama–French factors. Both time-series and cross-sectional tests are formulated and applied. The results show that (1) global Fama–French factors have strong power to explain global equity returns and (2) sustainability investments have no significant impact on global equity returns. The absence of a significant relationship between ...
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    The core goal of this study is to empirically investigate whether there is a “world price” of corporate sustainability. This is assessed in the context of standard asset pricing models—in particular, by asking whether a risk premium attaches to a sustainability factor after controlling for the Fama–French factors. Both time-series and cross-sectional tests are formulated and applied. The results show that (1) global Fama–French factors have strong power to explain global equity returns and (2) sustainability investments have no significant impact on global equity returns. The absence of a significant relationship between sustainability and returns implies that large institutional investors are free to implement sustainability mandates without fear of breaching their fiduciary duties from realising negative returns due to incorporating a sustainability investment process.
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    Journal Title
    Journal of Business Ethics
    Volume
    114
    Issue
    2
    DOI
    https://doi.org/10.1007/s10551-012-1342-2
    Subject
    Banking, Finance and Investment not elsewhere classified
    Business and Management
    Marketing
    Applied Ethics
    Publication URI
    http://hdl.handle.net/10072/345008
    Collection
    • Journal articles

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