Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

61 Pages Posted: 9 Aug 2017 Last revised: 11 Apr 2019

See all articles by Samuel M. Hartzmark

Samuel M. Hartzmark

University of Chicago - Booth School of Business

Abigail B. Sussman

University of Chicago - Booth School of Business

Date Written: March 25, 2019

Abstract

Examining a shock to the salience of the sustainability of the US mutual fund market, we present causal evidence that investors marketwide value sustainability. Being categorized as low sustainability resulted in net outflows of more than $12 billion while being categorized as high sustainability led to net inflows of more than $24 billion. Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high sustainability funds outperform low sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and non-pecuniary motives influencing investment decisions.

Keywords: Sustainability, Behavioral Finance, Fund Flows, Mutual Funds, Salience, Rank

JEL Classification: D03, G02, G12, G23

Suggested Citation

Hartzmark, Samuel M. and Sussman, Abigail B., Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows (March 25, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 565/2018. Available at SSRN: https://ssrn.com/abstract=3016092 or http://dx.doi.org/10.2139/ssrn.3016092

Samuel M. Hartzmark (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Abigail B. Sussman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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