Green Sentiment, Stock Returns, and Corporate Behavior

51 Pages Posted: 24 May 2021 Last revised: 23 Mar 2023

See all articles by Marie Briere

Marie Briere

Amundi Asset Management; Paris Dauphine University; Université Libre de Bruxelles

Stefano Ramelli

University of St. Gallen - School of Finance; Swiss Finance Institute

Date Written: September 20, 2022


In this paper, we propose a new method to estimate non-fundamental demand shocks for green financial assets based on the arbitrage activity of exchange-traded funds (ETFs). By estimating the monthly abnormal flows into environment-friendly ETFs, we construct a Green Sentiment Index that captures shifts in investors’ appetite for environmental responsibility that is not yet priced in the value of the underlying assets. Our measure of green sentiment differs significantly from the news-based climate indexes proposed by the extant literature, and it has additional explanatory power on both stock returns and corporate decisions. Over the period 2010-2020, shifts in green sentiment anticipate a persistent stock-price out-performance of more environmentally responsible firms, as well as an increase in their capital investments and cash holdings, particularly for more equity-dependent ones.

Keywords: Climate finance, corporate behavior, ESG, responsible investments, investor sentiment, non-fundamental demand, stock returns

JEL Classification: G12, G32, G41

Suggested Citation

Briere, Marie and Ramelli, Stefano, Green Sentiment, Stock Returns, and Corporate Behavior (September 20, 2022). Available at SSRN: or

Marie Briere

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015

Paris Dauphine University ( email )

Université Libre de Bruxelles ( email )


Stefano Ramelli (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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