Performance of Value and Growth companies with different ESG rankings: Evidence from the US stock market

Sammanfattning: The purpose of this paper is to focus on sustainable investments and to observe if the performance can be improved by combining the aspect of value and growth investments. The sample consists of groups of companies which are representing value or growth with either high or low ESG risk level. Different portfolios are constructed based on these groups between a time-period of 2 November 2016 and 26 February 2021, and performances of the portfolios are estimated by using the CAPM, Fama-French three-factor model, Carhart four-factor model, and different performance ratios. The risk-adjusted performance order of the constructed portfolios is estimated with the alpha-values of the factor-models and supported with the measures of the performance ratios. The study finds that the combined effect of both value/growth and ESG risk can be observed contributing the outperformance of the growth portfolio when compared to the performances of the other constructed portfolios, especially when increasing the EGS risk of this portfolio. This result is significant and supported by all the models computed in this research. The found evidence is not in line with the previous research which makes the studied combination not being unambiguous.