More Than Chatter: An Index of Sustainability Sentiment
79 Pages Posted: 18 Nov 2021 Last revised: 23 May 2022
Date Written: November 16, 2021
We develop a novel and direct measure of investor sentiment for sustainability using microblogging-data from a social media investing platform and present evidence that it predicts asset prices. Our sustainability sentiment index contains granular information on environmental, social, and governance concerns separately, with social concerns more prominent during market crises and affecting long-term asset prices. In terms of return predictability, we find that (i) positive sentiment shocks drive up short-term returns of sustainable stocks, which is corrected in the long run; (ii) negative sentiment shocks predict long-term asset price decreases for sustainable stocks; and (iii) sentiment forecasts flows into sustainable mutual funds.
Keywords: sustainable finance, investor sentiment, ESG, asset pricing
JEL Classification: G12, G40, Q01
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