Extensión del modelo de tres factores de Fama y French, rendimientos de mercado y sustentabilidad corporativa

Abstract

A Three-Factor Fama and French Model Extension, Market Returns and Corporate Sustainability 

Objective: to demonstrate if corporate sustainability represents a factor that impacts the market returns of companies. Methodology: An extension of Fama and French's three-factor linear model, it analyzes the expected excess return over the risk-free rate as a function of sensitivity to three factors (systematic risk premium, firm size factor, and factor capitalization); with a fourth factor (company sustainability), measured by its ESG rating. Monthly historical data on the share price of 505 SP500 companies from 2002 to 2021. Results: Sustainability is not a determining factor in market returns. Recommendation: use lags in future research. Limitation: Does not consider disputes in ESG ratings, which could change results. Originality: the way to measure performance considering its sustainability evaluation. Conclusion: sustainability in companies has an economic cost in the short term that impacts returns, but in the medium or long term, it represents an incentive for investors and clients.