Utility in the Age of Sustainability: A General Equilibrium Asset Pricing Model for ESG Investing

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dc.contributor.advisorGoossens, Jorgo
dc.contributor.authorOverwater, Daan
dc.date.issued2024-07-10
dc.description.abstractThis thesis investigates how incorporating investors' Environmental, Social, and Governance (ESG) preferences into a general equilibrium asset pricing model affects the prices of green and brown assets. Extending the work of Pástor et al. (2021), the study explores the impact of ESG preferences on market dynamics and asset pricing. The thesis examines how disaggregating ESG preferences into individual components leads to a more precise reflection of investor preferences, resulting in asset prices that better align with distinct ESG characteristics. It also explores the role of relative ESG risk aversion, finding that ESG risk aversion affect the equity premiums of green and brown assets. Additionally, the study investigates the impact of ESG aversion, revealing that investors with negative ESG preferences prioritize negative ESG impacts over positive impacts, leading to higher prices for brown assets and lower prices for green assets. The findings highlight the importance of ESG preferences in asset pricing models, leading to a more accurate reflection of investor behaviour and market dynamics. These insights are valuable for financial institutions, policymakers, and researchers. Future research should empirically validate these models and develop frameworks with fewer assumptions to capture real-world dynamics better.
dc.identifier.urihttps://theses.ubn.ru.nl/handle/123456789/17443
dc.language.isoen
dc.thesis.facultyFaculteit der Managementwetenschappen
dc.thesis.specialisationspecialisations::Faculteit der Managementwetenschappen::Master Economics::Corporate Finance & Control
dc.thesis.studyprogrammestudyprogrammes::Faculteit der Managementwetenschappen::Master Economics
dc.thesis.typeMaster
dc.titleUtility in the Age of Sustainability: A General Equilibrium Asset Pricing Model for ESG Investing
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