Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash
42 Pages Posted: 24 Apr 2020 Last revised: 28 Aug 2021
Date Written: June 22, 2020
The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of environmental and social (ES) policies. This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of 2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks.
Keywords: ESG, CSR, COVID-19, market crash, exogenous shock, stock returns, volatility, customer loyalty, investor loyalty
JEL Classification: G12, G32, M14
Suggested Citation: Suggested Citation