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ESG Preference, Institutional Trading, and Stock Return Patterns

Jie Cao, Sheridan Titman, Xintong Zhan and Weiming Zhang

No 28156, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Socially responsible (SR) institutions tend to focus more on the ESG performance and less on quantitative signals of value. Consistent with this difference in focus, we find that SR institutions react less to quantitative mispricing signals. Our evidence suggests that the increased focus on ESG may have influenced stock return patterns. Specifically, abnormal returns associated with these mispricing signals are greater for stocks held more by SR institutions. The link between SR ownership and the efficacy of mispricing signals only emerges in recent years with the rise of ESG investing, and is significant only when there are arbitrage-related funding constraints.

JEL-codes: G12 G4 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-fmk
Note: AP
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Published as Jie Cao & Sheridan Titman & Xintong Zhan & Weiming Zhang, 2023. "ESG Preference, Institutional Trading, and Stock Return Patterns," Journal of Financial and Quantitative Analysis, vol 58(5), pages 1843-1877.

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