Understanding ESG investing using higher return moments
Year: 2025
Type: article
Abstract: This study explores the link between environmental, social, and governance (ESG) performance and higher return moments (i.e., skewness and kurtosis) addressing a key research gap. It hypothesizes that firms with stronger ESG performance exhibit higher return skewness due to improved market perception and reduced downside risk, as well as lower return kurtosis resulting from better risk management and financial conservatism. Investors accept lower mean returns in ESG firms due to skewness preference and kurtosis aversion, a theory-supported notion. Empirical findings confirm these expectations, clarifying the significance of skewness and kurtosis risk management for ESG investors.
Source: Finance research letters
Author: Tao Shan
Institution: The University of Melbourne
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,730
OpenAlex ID: W4409301184