Sustainability Efforts, Index Recognition, and Stock Performance

Moonsoo Kang (), K. G. Viswanathan, Nancy A. White and Edward J. Zychowicz
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K. G. Viswanathan: Hofstra University
Nancy A. White: Hofstra University
Edward J. Zychowicz: Hofstra University

A chapter in Risks Related to Environmental, Social and Governmental Issues (ESG), 2022, pp 45-57 from Springer

Abstract: Abstract We examine the long-term performance of stocks appearing in the Dow Jones Sustainability Index North America. We find that sustainability stocks exhibit abnormal returns for 12–30 months after the index listing, while those stocks generate no excess returns before the index listing. Moreover, sustainability stocks experience an increase in institutional ownership after the index listing. However, we find no evidence that short sellers increase their position to exploit a possible overpricing for sustainability stocks. Overall, our analysis suggests that sustainability efforts translate into a permanent increase in demand for stocks, leading to the superior performance.

Keywords: Sustainable investing; ESG; Stock performance; Institutional ownership; Short sales (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/978-3-031-18227-3_5

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