The impact of green investors on stock prices

Gong Cheng, Eric Jondeau, Benoit Mojon and Dimitri Vayanos

No 1127, BIS Working Papers from Bank for International Settlements

Abstract: We study the impact of green investors on stock prices in a dynamic equilibrium asset pricing model where investors are green, passive or active. Green investors track an index that excludes progressively the firms with the highest greenhouse gas emissions. Active investors maximize expected returns and can buy stocks of brown firms whereas passive investors hold an index of the entire market. Contrary to the literature, we find a large fall in the stock prices of the high-emitting firms that are excluded and in turn an increase in stock prices of greener firms when the exclusion strategy is announced and during the transition process. The immediate and large effects at the announcement date yield a first-mover advantage to green investors that adopt the decarbonization strategy early. This large price impact comes from the imperfect substitution of stocks among investor populations. A smaller size of active investors relative to green investors amplifies the price impact of green investment.

Keywords: asset pricing; green investing; passive investing; portfolio rebalancing (search for similar items in EconPapers)
JEL-codes: G12 G23 Q54 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bis.org/publ/work1127.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work1127.htm (text/html)

Related works:
Working Paper: The Impact of Green Investors on Stock Prices (2024)
Working Paper: The Impact of Green Investors on Stock Prices (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1127

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().