Political Elections and Market Reactions: The ‘Trump Effect’ on Green Stocks

Abstract

The election of Donald Trump as the 45th president of the United States and his sceptical positions on climate threaten the fight against climate change, potentially undermining investors' green concerns. Through an event study approach, we aim to analyse the reaction of the U.S. stock market to the latest presidential election, exploring the investors' reactions across sectors. We find a strong heterogeneous reaction across sectors. Moreover, we show that the worst performance in the short period is attributable to companies with better performance on environmental issues, symbolizing an adjustment of investment preferences in anticipation of President Trump's anti-climate policies.

Keywords: Political elections, ESG, Environmental performance, performance, Event study