The Asymmetry in Responsible Investing Preferences

50 Pages Posted: 21 May 2020 Last revised: 19 Aug 2021

See all articles by Jacquelyn Humphrey

Jacquelyn Humphrey

University of Queensland - Business School

Shimon Kogan

IDC Herzliya - Arison School of Business; University of Pennsylvania - The Wharton School

Jacob S. Sagi

University of North Carolina Kenan-Flagler Business School

Laura T. Starks

University of Texas at Austin - Department of Finance

Date Written: August 18, 2020

Abstract

We design an experiment to understand how social preferences affect investment decisions through stock allocations and probability assessments. The major preference channel is asymmetric in social outcomes – although negative and positive responsible investment (RI) externalities have the same magnitudes, negative externalities have greater impact on investment choices. The effect is persistent, but heterogenous. We also find asymmetries in belief formation and learning constitute a secondary channel. Overall, our results are consistent with important stylized empirical facts and the predictions of recent RI theories that social preferences lead to different investment choices, but our analyses also suggest important future modeling directions.

Keywords: Social Preferences, Responsible Investment (RI), Social Responsible Investment (SRI)

JEL Classification: G11, G41, C91

Suggested Citation

Humphrey, Jacquelyn and Kogan, Shimon and Sagi, Jacob and Starks, Laura T., The Asymmetry in Responsible Investing Preferences (August 18, 2020). Available at SSRN: https://ssrn.com/abstract=3583862 or http://dx.doi.org/10.2139/ssrn.3583862

Jacquelyn Humphrey

University of Queensland - Business School ( email )

4072 Brisbane Queensland
Australia

Shimon Kogan (Contact Author)

IDC Herzliya - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Jacob Sagi

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/sagij/

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
409
Abstract Views
1,489
rank
89,834
PlumX Metrics