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Socially Responsible Investing in Good and Bad Times

Author

Listed:
  • Ravi Bansal
  • Di (Andrew) Wu
  • Amir Yaron

Abstract

We investigate the time variability of abnormal returns from socially responsible investing (SRI). Using portfolio regressions and event studies on multiple data sources, including analyst ratings, firm announcements, and realized incidents, we find that highly rated SRI stocks outperform lowly rated SRI stocks during good economic times, for example, periods with high market valuations or aggregate consumption, but underperform during bad times, such as recessions. This variation in abnormal returns of high-SR stocks vis-à-vis low SR stocks is consistent with a wealth-dependent investor preference for SR stocks that leads to an increased (decreased) demand for SRI during good (bad) times.

Suggested Citation

  • Ravi Bansal & Di (Andrew) Wu & Amir Yaron, 2022. "Socially Responsible Investing in Good and Bad Times," The Review of Financial Studies, Society for Financial Studies, vol. 35(4), pages 2067-2099.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:4:p:2067-2099.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab072
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    Cited by:

    1. Chenyu Shan & Dragon Yongjun Tang, 2023. "The Value of Employee Satisfaction in Disastrous Times: Evidence from COVID-19," Review of Finance, European Finance Association, vol. 27(3), pages 1027-1076.
    2. Huang, Chenchen & Luo, Di & Mukherjee, Soumyatanu & Mishra, Tapas, 2022. "To Acquire or to Ally? Managing Partners’ Environmental Risk in International Expansion," MPRA Paper 117591, University Library of Munich, Germany, revised 07 Jan 2023.
    3. Kräussl, Roman & Oladiran, Tobi & Stefanova, Denitsa, 2023. "A review on ESG investing: Investors' expectations, beliefs and perceptions," CFS Working Paper Series 694, Center for Financial Studies (CFS).
    4. Hu, Xiaolu & Yu, Jing & Zhong, Angel, 2023. "The asymmetric effects of oil price shocks on green innovation," Energy Economics, Elsevier, vol. 125(C).

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G40 - Financial Economics - - Behavioral Finance - - - General

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