Chasing the ESG factor

Abraham Lioui, Andrea Tarelli*

*Autore corrispondente per questo lavoro

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review


We analytically compare two dominant methodologies for the construction of an ESG factor: the time-series (ratings used to sort stocks) and cross-sectional (ratings used to weight stocks) approaches. Differences in ESG rating and exposure to other firm characteristics imply an ex ante expected return spread between the two factors. We construct a cross-sectional factor (i) featuring a targeted rating, thus allowing comparability with other factors, (ii) neutralizing exposure to other firm characteristics, and (iii) not harming diversification through stock screening. Using ratings from several data vendors, we document strong variations of the factor alpha in the time series and across vendors. The conditional alpha is negatively related to the level of media attention for ESG and positively related to variations in media attention.
Lingua originaleEnglish
pagine (da-a)N/A-N/A
Numero di pagine24
Stato di pubblicazionePubblicato - 2022


  • Cross-sectional asset pricing
  • ESG
  • Factor investing
  • Media attention


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