Recently it came to our attention that four students at Southern University of Science and Technology in China have published a paper in “International Review of Financial Analysis”. The paper concludes that ESG sentiment data can indeed be used to predict stock price crash risk. This is in line with previous research, last spring we supplied data to Mattias Olsson and Shabier Stanakzai when they wanted to research how ESG data correlated with CDS spreads and thus its usefulness in pricing risk in fixed income assets. The correlation proved significant, and the ESG data can therefore be used to price CDS. In 2022 we also supplied data to Markus Haevaker who used our data to improve algo trading models trading the constituents of OMX30.
The results are unanimous, ESG sentiment data has a strong correlation to the underlying assets performance on the market. You can access the paper here.
