Herding and Anti-Herding Across ESG Funds

Rocco Ciciretti, Ambrogio Dalò () and Giovanni Ferri
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Ambrogio Dalò: University of Groningen

No 524, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We investigate to what extent ESG funds present an herding/anti-herding behavior, and the consequences of their investment strategies in terms of both systematic risk exposure and risk-adjusted returns. Our findings document that ESG funds pursue an anti-herding strategy that leads to higher risk-adjusted returns. Specifically, a one standard deviation increase in ESG score at the fund-level is associated with an increase in fund performance of about 3.74 basis points per year. Moreover, we document that such an enhanced performance does not come at the cost of higher systematic risk exposure but instead reduces it. A possible explanation behind our findings is that after the catching-up phase previously documented by the literature, ESG funds are now able to put to good use enhanced stock-picking skills built over the years.

Keywords: ESG investing; Equity Funds; Herding; Anti-Herding; Risk-Adjusted Returns (search for similar items in EconPapers)
JEL-codes: C58 G11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021-11-05, Revised 2021-11-05
New Economics Papers: this item is included in nep-cwa and nep-fmk
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