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The Impact of Green Investors on Stock Prices

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  • Cheng, Gong
  • Jondeau, Eric
  • Mojon, Benoit
  • Vayanos, Dimitri

Abstract

We study the impact of green investors on stock prices in a dynamic equilibrium model where investors are green, passive or active. Green investors track an index that progressively excludes the stocks of the brownest firms; passive investors hold a value-weighted index of all stocks; and active investors hold a mean-variance efficient portfolio of all stocks. Contrary to the literature, we find large drops in the stock prices of the brownest firms and moderate increases for greener firms. These effects occur primarily upon the announcement of the green index's formation and continue during the exclusion phase. The announcement effects imply a first-mover advantage to early adopters of decarbonisation strategies.

Suggested Citation

  • Cheng, Gong & Jondeau, Eric & Mojon, Benoit & Vayanos, Dimitri, 2024. "The Impact of Green Investors on Stock Prices," CEPR Discussion Papers 18906, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18906
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    Cited by:

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    2. Berk, Jonathan B. & van Binsbergen, Jules H., 2025. "The impact of impact investing," Journal of Financial Economics, Elsevier, vol. 164(C).
    3. Coqueret, Guillaume & Giroux, Thomas & Zerbib, Olivier David, 2025. "The biodiversity premium," Ecological Economics, Elsevier, vol. 228(C).
    4. Luo, Zijun & Liu, Yue & Xu, Weidong, 2025. "Carbon emission trading scheme and green investor entry: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    5. Draganac, Dragana & Lu, Kelin, 2025. "Pricing asset beyond financial fundamentals: The impact of prosocial preference and image concerns," Journal of Economic Dynamics and Control, Elsevier, vol. 170(C).
    6. Niels Joachim Gormsen & Kilian Huber & Sangmin Simon Oh, 2024. "Climate Capitalists," NBER Working Papers 32933, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

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    JEL classification:

    • 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
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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