Are the Hedges of Funds Green?

68 Pages Posted: 15 Apr 2024

See all articles by Tianyi Qu

Tianyi Qu

University of Massachusetts Amherst

Bing Liang

University of Massachusetts Amherst - Department of Finance

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance

Huan Kuang

Bryant University

Date Written: March 26, 2024

Abstract

Hedge funds have become greener over the past decade. In this study, we construct a return-based method to measure hedge fund greenness and find that funds with higher green beta not only outperform other funds but also exhibit lower risk. This outperformance is driven by fund managers’ superior investment skill in both green stock picking and green factor timing. Furthermore, we document that investors reward green funds with higher inflows after the 2015 Paris Agreement, but only within high-performance funds. Finally, we show that political beliefs, climate news sentiment, and participation in the United Nations Principles for Responsible Investment (PRI) all influence hedge funds’ exposure to sustainable investing and investor flows.

Keywords: Climate finance; Carbon risk; Hedge funds; Socially responsible investing; Green picking skill; Green timing skill

JEL Classification: G11; G14; G23; G41

Suggested Citation

Qu, Tianyi and Liang, Bing and Getmansky Sherman, Mila and Kuang, Huan, Are the Hedges of Funds Green? (March 26, 2024). Available at SSRN: https://ssrn.com/abstract=4773780 or http://dx.doi.org/10.2139/ssrn.4773780

Tianyi Qu (Contact Author)

University of Massachusetts Amherst ( email )

Isenberg School of Management
Amherst, MA 01003
United States

Bing Liang

University of Massachusetts Amherst - Department of Finance ( email )

Amherst, MA 01003
United States

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance ( email )

Amherst, MA 01003-4910
United States

Huan Kuang

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

HOME PAGE: http://www.bryant.edu/academics/faculty/kuang-huan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
116
PlumX Metrics