Sustainability Efforts, Index Recognition, and Stock Performance
34 Pages Posted: 29 Jan 2021
Date Written: December 11, 2020
We examine the long-term performance of stocks appearing in the Dow Jones Sustainability Index North America. We find that sustainability stocks exhibit abnormal returns for 12 to 30 months after the index listing while those stocks generate no excess returns before the index listing. Moreover, sustainability stocks experience an increase in institutional ownership after the index listing. However, we find no evidence that short sellers increase their position to exploit a possible overpricing for sustainability stocks. Overall, our analysis suggests that sustainability efforts translate into a permanent increase in demand for stocks, leading to the superior performance.
Keywords: Sustainable Investing, ESG, Stock Performance, Institutional Ownership, Short Sales
JEL Classification: G11, G14
Suggested Citation: Suggested Citation