Do stock prices react to ESG sentiment?

34 Pages Posted: 6 Apr 2022 Last revised: 17 Jul 2023

See all articles by Emilie Kvam

Emilie Kvam

Norwegian University of Science and Technology (NTNU)

Peter Molnár

University of Stavanger

Ingvild Wankel

Norwegian University of Science and Technology (NTNU)

Bernt Arne Ødegaard

University of Stavanger

Date Written: June 24, 2024

Abstract

We study the links between corporate ESG (Environmental, Social and Governance) issues and stock prices. We create ESG-related sentiment proxies using internet search and social media data (Google and Twitter). Using these innovations in ESG measures adds to current literature relying on ESG rankings, which are prone to misclassification. We find that companies with high ESG scores deliver low returns on average, but high short-term returns in times of heightened ESG concerns, measured both using heightened social media interest in ESG (at the company or economy-wide level), or positive ESG sentiment (from Twitter). While our results cannot be explained by investor sentiment (Baker and Wurgler, 2006) alone, they are consistent with the equilibrium models of Pastor et al. (2021) and Pedersen et al. (2021)

Keywords: ESG (Environmental, Social, Governance), Sentiment, Social Media

JEL Classification: G10, G12

Suggested Citation

Kvam, Emilie and Molnár, Peter and Wankel, Ingvild and Ødegaard, Bernt Arne, Do stock prices react to ESG sentiment? (June 24, 2024). Available at SSRN: https://ssrn.com/abstract=4057988 or http://dx.doi.org/10.2139/ssrn.4057988

Emilie Kvam

Norwegian University of Science and Technology (NTNU)

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Peter Molnár

University of Stavanger ( email )

UiS Business School
Stavanger, 4036
Norway

Ingvild Wankel

Norwegian University of Science and Technology (NTNU)

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Bernt Arne Ødegaard (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, NO-4036
Norway

HOME PAGE: http://ba-odegaard.no

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