ESG Rating Dispersion and Expected Stock Return in China

ESG rating dispersion has left responsible investors in great confusion and posed non-negligible barriers to sustainable investment. Despite its importance, there is a lack of research on the role portfolio decisions asset pricing for Chinese capital market. We reveal negative return predictability dispersion, which cannot be solely attributed common risk exposures. also consider two potential mechanisms based institutional investor demand belief underlying this relation. Our findings have important practical implications managers seeking optimize financial performance while investing responsibly.