Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash
27 Pages Posted: 24 Apr 2020 Last revised: 15 May 2020
Date Written: May 1, 2020
The COVID-19 pandemic and the subsequent lockdown brought about a massive slowdown of the economy and an unparalleled stock market crash. Using U.S. data, this paper explores how firms with high Environmental and Social (ES) ratings fare during the first quarter of 2020 compared to other firms. We show that stocks with high ES ratings have significantly higher returns and lower return volatilities than other stocks. Firms with high ES ratings and high advertising expenditures perform especially well during the crash. This paper highlights the importance of ES policies in making firms more resilient during a time of crisis.
Keywords: ESG, COVID-19, market crash, stock returns, volatility, customer loyalty
JEL Classification: G12, G32, M14
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