Greenex Index In Asset Pricing Models: Validating The Carhart Model For Evaluating Energy-Efficient Perspectives

Abstract

This study discusses validity about “asset pricing models” within respect context based on “S&P Base Greenex Index”. With use of the gathered data from 25 companies we apply the “Carhartfour- factor model” and additional risk to evaluate how returns on green investments are explained through multifactor regression, OLS, GRS F test, “Sharpe ratio, and Jensen’s alpha”. The R² about “Carhart four-factor model” with GHG emission of 86-87% is “High” than the R² of the “Carhart four-factor model”. After reviewing the existing literature, there is a gap identified as the inclusion of climate factors within “asset pricing models” area. This article examines the Green ex index’s performance in “asset pricing models” firstly from the perspective of sustainable investing.