Green Sentiment, Stock Returns, and Corporate Behavior

51 Pages Posted: 24 May 2021 Last revised: 20 Sep 2021

See all articles by Marie Briere

Marie Briere

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

Stefano Ramelli

University of Zurich - Department of Banking and Finance

Date Written: September 20, 2021


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 are 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, (of approximately 53 basis points over six months for a one-standard-deviation higher green sentiment) 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, 2021). 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 Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
+41446342953 (Phone)

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