Stockholm Stock Exchange and Environmental Rating – A Multifactor Analysis

Abstract

The thesis investigates if investors can generate positive abnormal performance by investing in Environmental high-rated stocks on the Stockholm stock exchange based on three screening strategies; positive, negative and best-in-class for value-weighted, long-only and long-short portfolios. The sample is between 2010-2020, using CAPM, Fama-French three factor model and Carhart four factor model. The results show that the long-only portfolios with the positive and negative screening strategies generate positive and significant results, where the negative generates the strongest result with a monthly return of 0.0156% with Carhart. The best-in-class screening strategy generates mixed and inconclusive results for all portfolios. The thesis concludes that the result is mixed and that investors do wisely by investing in long-only portfolios using the positive and-or negative screening strategies.