The F-score revisited - an application to ESG leaders in order to find abnormal return

• Autor(a) principal: Kreß, Tobias
• Data de Publicação: 2019
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/70655
• topic: F-score; ESG; CSR; Investment strategy; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

The goal of this paper is to examine whether investors can create a more profitable investment strategy by further screening the extreme F-Score companies based on their ESG standards. When applied to the S&P 1200 global index between 2010 and 2018, the results reinforce the success of the pure F-Score strategy in separating ‘winning from losing’ companies. In addition, I find contracting results to the positive CSP-CFP relationship, especially with respect to the Social sub-component. Overall, I achieve the highest portfolio return by implementing an incongruent investment strategy, which forms yearly portfolios based on firms with the highest F-Score and lowest Social-Score. After risk-adjusting the portfolio returns by the Fama-French risk-factors, abnormal returns are achievable by holding portfolios that are composed out of either high F-Score firms, low ESG-Score firms or the combination of both (incongruent strategy). In conclusion, the evidence implies that financial markets do not completely incorporate historical financial and non-financial information into equity prices in a timely manner, advocating the mispricing explanation.