Socially Responsible Investing in Good and Bad Times

45 Pages Posted: 25 Oct 2018 Last revised: 25 Aug 2021

See all articles by Ravi Bansal

Ravi Bansal

Duke University and NBER

Di (Andrew) Wu

University of Michigan, Stephen M. Ross School of Business

Amir Yaron

Bank of Israel; University of Pennsylvania -- Wharton School of Business; National Bureau of Economic Research (NBER)

Date Written: February 10, 2018

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-a-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

Bansal, Ravi and Wu, Di and Yaron, Amir and Yaron, Amir, Socially Responsible Investing in Good and Bad Times (February 10, 2018). Available at SSRN: https://ssrn.com/abstract=3259209 or http://dx.doi.org/10.2139/ssrn.3259209

Ravi Bansal

Duke University and NBER ( email )

Box 90120
Durham, NC 27708-0120
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Di Wu (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

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Ann Arbor, MI MI 48109
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Amir Yaron

University of Pennsylvania -- Wharton School of Business ( email )

The Wharton School
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Bank of Israel

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Israel

National Bureau of Economic Research (NBER) ( email )

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