Building an optimal portfolio based on esg rating
https://doi.org/10.55959/MSU0130-0105-6-59-5-3
Abstract
The paper examines the construction of an optimal portfolio based on an ESG (environmental, social and governance) rating. In the paper, the authors answer the question of how the ESG rating indicator affects the risk, return and Sharpe ratio of portfolios. Based on literature review, the authors conclude that there is an ambiguous relationship between ESG ratings, and the returns of the stocks included in the investment portfolio. To answer the research question, the authors apply regression analysis and use the method of constructing optimal portfolios based on Markowitz theory under the condition of maximising the Sharpe ratio. Drawing on the results of the study, the authors proved a negative relationship between stock returns and ESG ranking. It was determined that a portfolio composed of stocks with a high ESG rating has a lower return, volatility and beta coefficient compared to a portfolio composed of stocks with a low ESG rating. The Sharpe Ratio for the portfolio of high ESG stocks was lower in three of the six years under review, about equal in one year, and higher in the remaining two periods compared to the ratio for the portfolio of low ESG stocks.
About the Authors
V. V. Nazarova
National Research University Higher School of Economics
Russian Federation
Russian Federation
I. U. Churakova
National Research University Higher School of Economics
Russian Federation
Russian Federation
A. A. Garbar
National Research University Higher School of Economics
Russian Federation
Russian Federation
A. E. Shipov
National Research University Higher School of Economics
Russian Federation
Russian Federation
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Review
For citations:
Nazarova V.V., Churakova I.U., Garbar A.A., Shipov A.E. Building an optimal portfolio based on esg rating. Moscow University Economics Bulletin. 2024;(5):52-76. (In Russ.) https://doi.org/10.55959/MSU0130-0105-6-59-5-3
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