Yes, ESG Stocks Outperform
Please note: Past performance may not be indicative of future results. The material in this presentation is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by Sensefolio, Sense Portfolio SAS or its employees.
It is not news, ESG stocks do outperform.
The following trading strategies are solely using the Sensefolio Signals. This means that every trade and positions are made out of our own internal signals on a regular basis, depending on the stated period of year.
Also, at the beginning of each rebalancing, we assign equal weights to the top/bottom names according to their Sensefolio scores. Further studies will be carried out later to discover whether assigning more weight to top Sensefolio ranked names lead to better overall performance.
Each strategy is fully explained in each strategy’s section in this paper.
DATA SET USED FOR PERFORMANCE VALUATION
Jan. 1, 2011 to Jun. 29, 2018
COMPONENTS TAKEN UNDER CONSIDERATION
The stocks that were taken under consideration are listed in the Sensefolio Coverage List in the Appendix.
ASSUMED TRANSACTION COST
ACTIVE TRADING STRATEGIES
In this part, we are back-testing two portfolios being rebalanced every 3 months or 6 months.
The following strategies are realized by taking long positions on the top 40 companies having the highest Sensefolio scores every 3 months or every 6 months.
We have constructed an index for each strategy starting at the 100 level. We have also set the starting point of the S&P500 at the 100 level for comparison purposes.
We obtain the following results:
The outcomes show that by rebalancing our portfolio every 6 months, we outperform the S&P 500. Indeed, the Sharpe ratio of the portfolio being rebalanced every 6 months is equal to 1.11 compared to aSharpe ratio of 1.02 for the S&P 500. However, by rebalancing our portfolio of the highest 40 Sensefolio-ranked stocks, we obtain aSharpe ratio of only ‘0.81’.
It thus seems like Sensefolio scores are better able to predict middle- to long- term stock prices than to predict short-term (i.e. 3 months) stock prices. These results lead us to endeavour back-testing longer rebalances (i.e. rebalancing every 9 and 12 months).
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