Analyzing How ESG-Integrated Smart Beta Strategies Perform in the ASEAN Stock Market
Keywords:
ASEAN Stock Markets, ESG Integration, Smart Beta Strategies, Sustainable InvestingAbstract
This study investigates the performance of Environmental, Social, and Governance (ESG)-integrated smart beta strategies in the ASEAN stock market from 2015 to 2023. Amidst growing global interest in sustainable investment practices, this research aims to bridge the gap in knowledge concerning the efficacy of combining ESG criteria with smart beta strategies within the unique economic and regulatory landscapes of the ASEAN region. Utilizing data sourced from Bloomberg, the study employs a quantitative approach, comparing the risk-adjusted returns of ESG-integrated smart beta portfolios against traditional market capitalization-weighted indices. The findings indicate that ESG-integrated smart beta strategies generally enhance portfolio performance in terms of Sharpe ratios and reduce portfolio risk, as measured by standard deviation across several ASEAN markets. However, the effectiveness varies significantly across different markets and factors, highlighting the importance of tailored investment strategies that consider local market dynamics. This research contributes to the academic literature by offering new insights into the applicability of ESG and smart beta strategies in emerging markets, providing valuable implications for both institutional and retail investors aiming to optimize portfolio performance while adhering to sustainability standards.
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