Novel Portfolio Construction Based on ESG

Yixuan Zhang

2024

Abstract

As global financial markets continue to grow increasingly complex, and as investors place greater emphasis on sustainable development, the limitations of traditional portfolio theory are becoming more evident. With this in mind, this study examines the impact of incorporating ESG (i.e., Environmental, Social, and Governance) factors into traditional multi-factor models on portfolio optimization, selecting eight stocks from different industries over the period of 2021-2024 as research subjects. By conducting an empirical analysis, the paper assesses the performance of portfolios with ESG factors across varying risk levels and contrasts these with portfolios based on traditional multi-factor models. According to the analysis, the inclusion of ESG factors leads to a significant enhancement in portfolio returns at different risk levels, particularly under high-risk conditions, where ESG factors demonstrate strong capabilities in improving risk-adjusted returns. These results provide valuable empirical support for the integration of ESG factors into modern portfolio optimization, offering fresh insights for the advancement of sustainable investment strategies.

Paper Citation

in Harvard Style

Zhang Y. (2024). Novel Portfolio Construction Based on ESG. In Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI; ISBN 978-989-758-726-9, SciTePress, pages 484-490. DOI: 10.5220/0013269200004568

in Bibtex Style

@conference{ecai24,
author={Yixuan Zhang},
title={Novel Portfolio Construction Based on ESG},
booktitle={Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI},
year={2024},
pages={484-490},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013269200004568},
isbn={978-989-758-726-9},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI
TI - Novel Portfolio Construction Based on ESG
SN - 978-989-758-726-9
AU - Zhang Y.
PY - 2024
SP - 484
EP - 490
DO - 10.5220/0013269200004568
PB - SciTePress