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The Impact of Green Investors on Stock Prices

Author

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

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

  • Gong Cheng & Eric Jondeau & Benoit Mojon & Dimitri Vayanos, 2024. "The Impact of Green Investors on Stock Prices," NBER Working Papers 32317, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32317
    Note: AP EEE
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    References listed on IDEAS

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    1. Andrea M. Buffa & Dimitri Vayanos & Paul Woolley, 2022. "Asset Management Contracts and Equilibrium Prices," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3146-3201.
    2. Philippe van der Beck & Coralie Jaunin, 2021. "The Equity Market Implications of the Retail Investment Boom," Swiss Finance Institute Research Paper Series 21-12, Swiss Finance Institute.
    3. Ariel K. H. Lui & Maggie C. M. Lee & Eric W. T. Ngai, 2022. "Impact of artificial intelligence investment on firm value," Annals of Operations Research, Springer, vol. 308(1), pages 373-388, January.
    4. Philippe van der Beck, 2021. "Flow-Driven ESG Returns," Swiss Finance Institute Research Paper Series 21-71, Swiss Finance Institute.
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    Cited by:

    1. Gormsen, Niels Joachim & Huber, Kilian & Oh, Sangmin S., 2024. "Climate capitalists," Working Paper Series 2990, European Central Bank.

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    More about this item

    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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