Are ESG Factors Effective Asset Pricing Factors in China’s A-share Market ——An empirical analysis based on the Fama-French five factor model

Abstract

In all asset pricing literature at home and abroad, it is a common pursuit of scholars to devote themselves to finding more effective factors. In recent years, along with the increasing prominence of global environmental and social issues, the focus of China’s policy has shifted from the pursuit of economic growth to sustainable development, and the concept of responsible investment has quietly gained popularity. We hypothesize that ESG factors have become a non-negligible factor in asset pricing. Therefore, this paper introduces ESG factors based on Fama’s five-factor model and constructs the FF5+ESG six-factor model, focusing on analyzing the pricing efficiency of ESG factors to provide the latest empirical evidence for China’s asset pricing model.