The impact of ethical factors on risk-adjusted return: evidence from the Chinese market

Research output: Contribution to journalArticlepeer-review


This paper examines the impact of the ESG score on risk-adjusted return by examining data from the Chinese market for the period 2006 to 2019. CAPM and factor model are applied to investigate the relationship between ESG score and risk-adjusted return. The empirical findings indicate that ESG scores affected portfolio risk-adjusted return significantly. We found that low ESG score portfolios generate higher average monthly returns than high ESG portfolios. Our findings are confirmed by second-stage regression analysis, providing robust evidence and suggesting that ethical ESG factors are a new risk component on top of size, value, and market factors that affect the risk-adjusted return. Overall, our results are useful for investors, and fund managers to assess the performance of their portfolios and the pricing of the assets.
Original languageEnglish
JournalInternational Journal of Financial Engineering and Risk Management
Publication statusAccepted for publication - 10 Jan 2023


  • sustainability
  • ethical
  • stakeholder
  • ESG
  • SRI
  • China

Cite this