Mutual Fund Loyalty and ESG Stock Resilience during the COVID-19 Stock Market Crash

64 Pages Posted: 23 Aug 2021 Last revised: 7 Sep 2021

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Yrjo Koskinen

Haskayne School of Business, University of Calgary; European Corporate Governance Institute (ECGI)

Raffaele Santioni

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: September 3, 2021

Abstract

This paper studies the trading behavior of U.S. actively managed equity mutual funds during the COVID-19 market crash. We show that Environmental, Social, and Governance (ESG) funds helped to stabilize the market by contributing to the resiliency of ESG stocks, but interestingly non-ESG funds also provided support for ESG stocks. First, ESG funds reduced net sales during the crash, controlling for fund flows. Second, all funds experiencing inflows helped to stabilize the market during the crash by increasing net purchases, but this behaviour was more pronounced for ESG funds. Third, funds experiencing outflows also played a key role contributing to the relative stability of ESG stocks as both ESG and non-ESG funds more aggressively sold their non-ESG stocks. We are able to uncover these results because we use monthly holdings data from Morningstar, instead of the commonly used quarterly data.

Keywords: Environmental and social responsibility, institutional investors, fund flows, trading horizon, COVID-19, stock market crash, investor loyalty

JEL Classification: G01, G12, G23, G32, M14

Suggested Citation

Albuquerque, Rui A. and Koskinen, Yrjo J and Santioni, Raffaele, Mutual Fund Loyalty and ESG Stock Resilience during the COVID-19 Stock Market Crash (September 3, 2021). European Corporate Governance Institute – Finance Working Paper No. 782/2021, Available at SSRN: https://ssrn.com/abstract=3908464 or http://dx.doi.org/10.2139/ssrn.3908464

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://sites.google.com/view/ruialbuquerque/home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Yrjo J Koskinen

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://https://haskayne.ucalgary.ca/haskayne_info/profiles/yrjo-koskinen

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/yrj%C3%B6-koskinen

Raffaele Santioni

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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