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Does the green inspiration effect matter for stock returns? Evidence from the Chinese stock market

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  • Tong Fang

    (Shandong University)

  • Zhi Su

    (Central University of Finance and Economics)

  • Libo Yin

    (Central University of Finance and Economics)

Abstract

We consider the role of the green inspiration effect in explaining the cross section of returns in the Chinese stock market. After constructing a new risk factor (the green risk factor), we empirically investigate the explanatory ability of this factor for the cross section of stock returns. We find that stocks of green industries have higher average returns, and the green risk factor significantly captures excess stock returns even after controlling for firm characteristic risk factors, institutional risks and economic factors. We also highlight in a subsample analysis that the explanatory power of the green risk factor improves after June 2008.

Suggested Citation

  • Tong Fang & Zhi Su & Libo Yin, 2021. "Does the green inspiration effect matter for stock returns? Evidence from the Chinese stock market," Empirical Economics, Springer, vol. 60(5), pages 2155-2176, May.
    • Handle: RePEc:spr:empeco:v:60:y:2021:i:5:d:10.1007_s00181-020-01843-1
    DOI: 10.1007/s00181-020-01843-1
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    More about this item

    Keywords

    Green inspiration; Asset pricing; Stock returns; Factor models; Subsample analysis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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