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Mutual fund trading and ESG stock resilience during the Covid-19 stock market crash

Author

Listed:
  • Rui Albuquerque

    (Carroll School of Management, Boston College, ECGI, CEPR)

  • Yrjo Koskinen

    (Haskayne School of Business, University of Calgary, ECGI)

  • Raffaele Santioni

    (Bank of Italy)

Abstract

Using proprietary monthly holdings data from Morningstar, we show that Environmental, Social, and Governance funds’ trading during the Covid-19 market crash was consistent with the choices of their clientele. Thus, ESG funds helped to stabilize the market for ESG stocks, but interestingly non-ESG funds did so too. First, all funds experiencing inflows helped to stabilize the market during the crash by increasing net purchases per dollar of inflows. This behaviour was more pronounced for ESG funds. Second, non-ESG funds experiencing outflows increased their net sales per dollar of outflow for non-ESG stocks, tilting their portfolios towards ESG stocks.

Suggested Citation

  • Rui Albuquerque & Yrjo Koskinen & Raffaele Santioni, 2022. "Mutual fund trading and ESG stock resilience during the Covid-19 stock market crash," Temi di discussione (Economic working papers) 1371, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1371_22
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2022/2022-1371/en_tema_1371.pdf
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    Citations

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    Cited by:

    1. Marco Pagano & Josef Zechner, 2022. "COVID-19 and Corporate Finance [The risk of being a fallen angel and the corporate dash for cash in the midst of COVID]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(4), pages 849-879.
    2. Selmi, Refk & Wohar, Mark & Deisting, Florent & Kasmaoui, Kamal, 2023. "Dynamic inflation hedging performance and downside risk: A comparison between Islamic and conventional stock indices," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 56-67.
    3. Zhang, Ning & Zhang, Yue & Zong, Zhe, 2023. "Fund ESG performance and downside risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).

    More about this item

    Keywords

    Environmental and social responsibility; clientele effects; fund flows; investor horizon; stock market crash;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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