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The performance of ESG portfolios: A stochastic dominance approach

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  • Zhou, Zihan
  • Wang, Shaolin
  • Wang, Hongxia

Abstract

This study uses a stochastic dominance approach to investigate portfolio performance based on Environmental, Social and Governance (ESG) criteria. Specifically, we conduct a series of stochastic dominance tests to determine whether high-ESG portfolios outperform low-ESG and market portfolios. The results reveal that, in the short term, no significant dominance relationships exist between high- and low-ESG portfolios. However, in the long term, high-ESG portfolios significantly dominate both low-ESG and market portfolios in terms of second- and third-degree stochastic dominance. Our findings offer valuable insights into integrating ESG considerations into investment decisions.

Suggested Citation

  • Zhou, Zihan & Wang, Shaolin & Wang, Hongxia, 2025. "The performance of ESG portfolios: A stochastic dominance approach," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324016301
    DOI: 10.1016/j.frl.2024.106601
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