Linkage between company scores and stock returns

Abstract

Abstract. Previous studies on company scores conducted at firm-level, generally concluded that there exists a positive relation between company scores and stock returns. Motivated by these studies, this study examines the relationship between company scores (Corporate Governance Score, Economic Score, Environmental Score, and Social Score) and stock returns, both at portfoliolevel analysis and firm-level cross-sectional regressions. In portfolio-level analysis, stocks are sorted based on each company scores and quintile portfolio are formed with different levels of company scores. Then, existence and significance of raw returns and risk-adjusted returns difference between portfolios with the extreme company scores (portfolio 10 and portfolio 1) is tested. In addition, firm-level cross-sectional regression is performed to examine the significance of company scores effects with control variables. While portfolio-level analysis results indicate that there is no significant relation between company scores and stock returns; firm-level analysis indicates that economic, environmental, and social scores have effect on stock returns, Vol.10, No.4, 2017 220 however, significance and direction of these effects change, depending on the included control variables in the cross-sectional regression.

Factors affecting development patterns: econometric investigation of the Japan equity market

“…Based on EMH and these studies, most researchers believe that most of the developed markets are reasonably efficient in mimicking the current and expected economic situations. Most of the time markets are dependent on a combination of some technical and fundamental variables, and this combination can change from time to time (Celik et al 2017;Tamulevi cien_ e, 2016;Monni et al 2017;Pasekov a et al 2017;Pietrzak et al 2017;Illmeyer et al 2017;Masood et al 2017;Petrenko et al 2017;Hilkevics & Hilkevica, 2017). In earlier years fundamental micro and macro variables have been studied extensively by, for example, Roll and Ross (1980), Fama (1981), Hamao (1988), Chen et al (1986), andMayasami andKoh (2000).…”