Sustainability Efforts, Index Recognition, and Stock Performance

34 Pages Posted: 29 Jan 2021

See all articles by Moonsoo Kang

Moonsoo Kang

CUNY Brooklyn College

K.G.

Hofstra University - Department of Finance

Nancy A White

affiliation not provided to SSRN

Edward J. Zychowicz

Hofstra University - Department of Finance

Date Written: December 11, 2020

Abstract

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

Kang, Moonsoo and Viswanathan, Kalpathy G. and White, Nancy A and Zychowicz, Edward J., Sustainability Efforts, Index Recognition, and Stock Performance (December 11, 2020). Available at SSRN: https://ssrn.com/abstract=3747343 or http://dx.doi.org/10.2139/ssrn.3747343

Moonsoo Kang (Contact Author)

CUNY Brooklyn College ( email )

2900 Bedford Avenue
Brooklyn, NY 11210
United States

Kalpathy G. Viswanathan

Hofstra University - Department of Finance ( email )

Hempstead, NY 11550
United States
516-463-5355 (Phone)
516-463-4834 (Fax)

Nancy A White

affiliation not provided to SSRN

Edward J. Zychowicz

Hofstra University - Department of Finance ( email )

Hempstead, NY 11550
United States

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