Comparative analysis of the financial risk of ESG Stocks and conventional Stocks

Abstract

This research paper aims to show which ESG and conventional stocks have the advantage of being less risky.This involves carrying out a systematic risk analysis and the specific risk of socially responsible stocks by comparing them with those of conventional (classic) stocks. The analysis concerns the stocks of 56 Moroccan companies listed on the Casablanca Stock Exchange (BVC) and the evolution of their values ​​during the period from 01/04/2010 to 01/31/2019. Two sets of stocks were chosen as independent samples to conduct this comparative analysis. A first sample consists of 10 stocks forming the "Casablanca ESG 10" stock market index, and the second sample contains 46 stocks also listed on the BVC.

The tests of normality have shown that the total, systematic and specific risk distributions for the two types of ESG and conventional stocks do not all follow a normal distribution. This means that using the Student's t-test to compare the means of total, systematic and specific risks is not sufficient, so it is important to also use the non-parametric Mann-Whitney U test.

Thus, the use of the two aforementioned tests made it possible to show that conventional equities and ESG equities effectively present the same levels of risk for both total risk and specific risk. On the other hand, the systematic risk was shown to be higher for ESG stocks than for conventional stocks.

JEL Classification : C12, D81, G11, M14.

Paper type : Empirical research