ESG Preference, Institutional Trading, and Stock Return Patterns

53 Pages Posted: 1 Dec 2020 Last revised: 8 Jun 2022

See all articles by Jie Cao

Jie Cao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Sheridan titman

University of Texas at Austin

Xintong Zhan

Department of Finance, School of Management, Fudan University

Weiming Elaine Zhang

The Chinese University of Hong Kong (CUHK)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2020

Abstract

Socially responsible (SR) institutions tend to focus more on the ESG performance and less on quantitative signals of value. Consistent with this difference in focus, we find that SR institutions react less to quantitative mispricing signals. Our evidence suggests that the increased focus on ESG may have influenced stock return patterns. Specifically, abnormal returns associated with these mispricing signals are greater for stocks held more by SR institutions. The link between SR ownership and the efficacy of mispricing signals only emerges in recent years with the rise of ESG investing, and is significant only when there are arbitrage-related funding constraints.

Suggested Citation

Cao, Jie and titman, Sheridan and Zhan, Xintong and Zhang, Weiming Elaine, ESG Preference, Institutional Trading, and Stock Return Patterns (November 2020). NBER Working Paper No. w28156, Available at SSRN: https://ssrn.com/abstract=3739653

Jie Cao (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

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Shatin, NT
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HOME PAGE: http://sites.google.com/site/jiejaycao

Sheridan Titman

University of Texas at Austin

Xintong Zhan

Department of Finance, School of Management, Fudan University ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

HOME PAGE: http://sites.google.com/view/xintongzhan

Weiming Elaine Zhang

The Chinese University of Hong Kong (CUHK) ( email )

Cheng Yu Tung Building
Shatin
Hong Kong

HOME PAGE: http://sites.google.com/site/weimingzhangelaine/

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