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Political elections and market reactions: The ‘Trump effect’ on green stocks

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  • Cosma, Simona
  • Cosma, Stefano
  • Gambarelli, Luca
  • Pennetta, Daniela
  • Rimo, Giuseppe

Abstract

The election of Donald Trump as the 45th president of the United States and his sceptical positions on climate threaten the fight against climate change, potentially weakening investors’ green concerns. Through an event study approach, we aim to analyse the reaction of the U.S. stock market to the latest presidential election, exploring the investors’ reactions across sectors. We find a strong heterogeneous reaction across sectors. Moreover, we show that the worst performance in the short period is attributable to companies with better performance on environmental issues, which could mean an adjustment of investors’ assessment criteria in anticipation of President Trump's anti-climate policies, reduced transition risk for "brown" firms and lower benefits for firms excelling in environmental performance.

Suggested Citation

  • Cosma, Simona & Cosma, Stefano & Gambarelli, Luca & Pennetta, Daniela & Rimo, Giuseppe, 2025. "Political elections and market reactions: The ‘Trump effect’ on green stocks," Economics Letters, Elsevier, vol. 249(C).
    • Handle: RePEc:eee:ecolet:v:249:y:2025:i:c:s0165176525000989
    DOI: 10.1016/j.econlet.2025.112261
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    More about this item

    Keywords

    Political elections; ESG; Environmental performance; Stock market; Event study;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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