Colloque / Séminaire


SEMINAIRE LABO - Olivier David ZERBIB, PhD candidate at SAF Lab and Tilburg University (CentER)

"A Sustainable Capital Asset Pricing Model (S-CAPM): Evidence from green investing and sin stock exclusion"

Abstract:

I demonstrate how sustainable investing through financial exclusion and environmental, social and governance (ESG) screening affect asset prices. I develop an asset pricing model with partial segmentation and heterogeneous beliefs. I characterize two exclusion premia generalizing Merton (1987)'s premium on neglected stocks and a taste premium that disentangles the link between ESG and  financial performance. By constructing an instrument that captures sustainable investors' tastes for green firms, I estimate this model applied to green investing and sin stock exclusion using U.S. data. The model has substantial explanatory power for the cross-section of stock returns and outperforms the four-factor model in several cases.


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