Review of Financial Studies Vol. 35 No. 4 2022

Socially Responsible Investing in Good and Bad Times

Ravi Bansal¹; Di Wu²; Amir Yaron³

¹ Fuqua School of Business, Duke University and NBER · ² Stephen M. Ross School of Business, University of Michigan · ³ Bank of Israel The Wharton School, University of Pennsylvania and NBER

Abstract

We investigate the time variability of abnormal returns from socially responsible investing (SRI). Using portfolio regressions and event studies on multiple data sources, including analyst ratings, firm announcements, and realized incidents, we find that highly rated SRI stocks outperform lowly rated SRI stocks during good economic times, for example, periods with high market valuations or aggregate consumption, but underperform during bad times, such as recessions. This variation in abnormal returns of high-SR stocks vis-à-vis low SR stocks is consistent with a wealth-dependent investor preference for SR stocks that leads to an increased (decreased) demand for SRI during good (bad) times.

DOI

10.1093/rfs/hhab072

Volume

35

Issue

4

Pages

2067-2099

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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