Comparison of green and non-green portfolio performance

This thesis examines the financial performance of green and non-green portfolios over a twenty year period. Efficient frontiers and Global Minimum Variance Portfolios (GMVP) are constructed using numerous static and dynamic methods to compare risk-return profiles. Portfolio performance is evaluated using Fama-French three and five factor models, Bayesian Model Averaging (BMA), and out-of-sample tests. Green portfolios are shown to offer higher expected returns but are riskier and are less well explained by standard factor models. Non-green portfolios exhibit more stable, predictable performance. Short selling is shown to expand efficient frontiers, reduce volatility, and enhance hedging opportunities, while dynamic covariance models improve risk outcomes. Green portfolios are shown to achieve competitive performance provided that advanced models and risk management strategies are employed.