Publicação
The performance of socially responsible corporate bond portfolios: empirical evidence for the US market
| Resumo: | This dissertation aims to assess the financial performance of US corporate bond portfolios formed based on socially responsible criteria between 2003 and 2018. Corporate social responsibility ratings are retrieved from the Thomson Reuters ESG Database, resulting in a dataset of 8670 bonds issued by 851 companies. Value-weighted portfolios are constructed using the positive and best-in-class screening strategies, for individual and aggregate CSR scores. Furthermore, high-rated, low-rated, and difference portfolios are built, with annual rebalancing. Regarding performance evaluation, unconditional and conditional multi-factor models are used. Overall results suggest that there are no differences between the performance of bonds issued by high-rated and low-rated companies. Although there are some changes in the alphas from high- and low-rated portfolios, the main conclusions reached for the positive approach remain robust to alternative cut-offs, weighting schemes, and the exclusion of the financial sector. Regarding the best-in-class strategy, low-rated portfolios based on social and ESG combined ratings outperform high-rated portfolios, however, this outperformance fades when extreme cut-offs are used. Finally, the performance analysis over time provides evidence of abnormal returns for high- and low-rated portfolios only after 2007, and there is no evidence in favor of the shunned-stock and errors-in-expectations hypotheses. |
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| Autores principais: | Gestosa, Liliana Garcia |
| Assunto: | Bonds Corporate bond portfolios ESG Performance evaluation Socially responsible investment Avaliação de desempenho financeiro Carteiras de obrigações Investimento socialmente responsável Obrigações Ciências Sociais::Economia e Gestão |
| Ano: | 2020 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | This dissertation aims to assess the financial performance of US corporate bond portfolios formed based on socially responsible criteria between 2003 and 2018. Corporate social responsibility ratings are retrieved from the Thomson Reuters ESG Database, resulting in a dataset of 8670 bonds issued by 851 companies. Value-weighted portfolios are constructed using the positive and best-in-class screening strategies, for individual and aggregate CSR scores. Furthermore, high-rated, low-rated, and difference portfolios are built, with annual rebalancing. Regarding performance evaluation, unconditional and conditional multi-factor models are used. Overall results suggest that there are no differences between the performance of bonds issued by high-rated and low-rated companies. Although there are some changes in the alphas from high- and low-rated portfolios, the main conclusions reached for the positive approach remain robust to alternative cut-offs, weighting schemes, and the exclusion of the financial sector. Regarding the best-in-class strategy, low-rated portfolios based on social and ESG combined ratings outperform high-rated portfolios, however, this outperformance fades when extreme cut-offs are used. Finally, the performance analysis over time provides evidence of abnormal returns for high- and low-rated portfolios only after 2007, and there is no evidence in favor of the shunned-stock and errors-in-expectations hypotheses. |
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