University of Twente Student Theses
Enhancing Portfolio Returns : an Analysis of Responsible Screening Strategies in Australian Financial Markets
Prinsen, Simon (2024) Enhancing Portfolio Returns : an Analysis of Responsible Screening Strategies in Australian Financial Markets.
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| Abstract: | This study investigates whether responsible investment screening strategies can deliver positive abnormal returns, while identifying the factors that drive such outperformance. Focusing on the Australian financial market, a market frequently overshadowed by studies on larger markets such as the U.S., Europe, and China, thereby addressing a significant gap in the responsible investing literature. Three portfolios were constructed based on Positive, Negative, and Ethical screening methods with thresholds derived from Environmental, Social, and Governance (ESG) data. The portfolios were evaluated through regression analyses using the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor model to assess abnormal returns, with additional comparisons made between the strategies using difference portfolios. The findings reveal that both Positive and Negative screening strategies generate significant positive abnormal returns, challenging established views in the literature. Although the Ethical screened portfolio does not exhibit significant abnormal returns, it achieves the highest compounded returns and second highest Sharpe ratio, suggesting its potential for stable, high performing investments. These results demonstrate that ESG screening strategies not only enhance portfolio performance but also align financial returns with ethical principles, thereby appealing to socially conscious investors. By offering a practical framework for investors and fund managers to integrate ESG considerations, this research bridges the gap between financial objectives and sustainability imperatives. Additionally, it contributes to the theoretical discourse on ESG integration, providing a foundation for further exploration of responsible investing strategies in diverse market contexts. |
| Item Type: | Essay (Master) |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 83 economics |
| Programme: | Business Administration MSc (60644) |
| Link to this item: | https://purl.utwente.nl/essays/104710 |
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