An Evidence-Based Approach to Markets with Larry Swedroe
Excess Returns
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ESG - Can You Have Your Cake and Eat It Too?
As a factor investor, I'm trained to believe I should be suffering some sort of pain in order to get my excess return. So we present as two chapters in the book that look at all of the evidence. Economic theory says screening athletes to lower returns for the good green companies and higher expected returns to the bracket. Now you have a conflicting force of work here. The ESG premium is getting bigger and bigger as green stocks are getting higher valuations; since stocks are getting lower valuations. In those years, those cash flows led to green stocks outperforming by 7% when they should have underperformed by three.
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