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Styles through a convergent/divergent lens: the curious case of ESG

Author

Listed:
  • Yang Gao

    (Huazhong University of Science and Technology)

  • Stephen Satchell

    (University of Cambridge
    The University of Sydney)

  • Nandini Srivastava

    (University of Cambridge)

Abstract

We look at a technique of classification, based on convergent and divergent patterns of returns that has been applied to hedge funds and alternative investments, and apply it to US equity investment styles with a particular interest in ESG. We extend the technique by looking at the impact of price changes on factor-mimicking portfolio weights. This analysis leads to powerful insights into style return dynamics. In particular, an ESG-ranked long-short portfolio looks more like momentum than value.

Suggested Citation

  • Yang Gao & Stephen Satchell & Nandini Srivastava, 2020. "Styles through a convergent/divergent lens: the curious case of ESG," Journal of Asset Management, Palgrave Macmillan, vol. 21(1), pages 4-12, February.
    • Handle: RePEc:pal:assmgt:v:21:y:2020:i:1:d:10.1057_s41260-019-00146-0
    DOI: 10.1057/s41260-019-00146-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Convergent; Divergent; ESG; Factor-mimicking portfolio; Styles;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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