Green Revenues Predict Stock Returns

Do the Markets Value the Green Revenues?

AuthorsHong Kong Institute for Monetary and Financial Research

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4310271

FTSE Russell constituents are grouped annually by prior-year green revenue (GR). Form High_GR and Low_GR portfolios; long High_GR, short Low_GR. GRHML spread captures alpha. Portfolios are value-weighted and rebalanced yearly.

Firms with higher green revenues tend to outperform. Strategy highlights how investor incentives and cultural factors influence the financial value of sustainable practices, reinforcing the link between environmental responsibility and stock performance.