Is Socially Responsible Investing A Luxury Good?

44 Pages Posted: 25 Oct 2018 Last revised: 18 Sep 2019

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

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 consistently find that "good" stocks significantly outperform "bad'' stocks during good economic times, e.g., periods with high aggregate consumption and market valuation but underperform during bad times such as recessions. This is consistent with a wealth-dependent investor preference that is more favorable toward SRI during good times, resulting in higher temporary demand for SRI---similar to time-varying shifts in the demand for luxury goods.

Suggested Citation

Bansal, Ravi and Wu, Di and Yaron, Amir, Is Socially Responsible Investing A Luxury Good? (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
United States
919-660-7758 (Phone)
919-660-8038 (Fax)

Di Wu (Contact Author)

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

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Amir Yaron

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

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-1241 (Phone)
215-898-6200 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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