Open AccessFactor Investment: Evaluating Persistence Effect for Investment Performance and Sustainability Exposure
Author(s) -
Xiaoshuang Yang,
Xingyu Chen
Publication year - 2021
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v13n6p143
Subject(s) - predictability , persistence (discontinuity) , economics , investment (military) , predictive power , econometrics , sustainability , investment strategy , microeconomics , mathematics , statistics , engineering , ecology , philosophy , law , biology , profit (economics) , geotechnical engineering , epistemology , politics , political science
This research includes two separate studies. The first study is devoted to evaluating the persistence effect by analyzing performances of portfolios ranked based on previous performances under various factor models. The result shows that the shorter the holding period, the stronger the predictability and that the Multi-factor model has the highest explaining power for the excess return regarding the underlying factors. The second study is devoted to exploring how sustainable investing influences alpha by introducing a new sustainable factor to reflect the premium due to exposure to sin industries. The study result shows that there is no significant alpha associated with sustainable investing and that there is no significant return differential between funds that have high/low exposure to the sustainable factor.