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The Impact of Green Investors on Stock Prices

Author

Listed:
  • Cheng, Gong
  • Jondeau, Eric
  • Mojon, Benoit
  • Vayanos, Dimitri

Abstract

We study the impact of green investors on stock prices in a dynamic equilibrium model where investors are green, passive or active. Green investors track an index that progressively excludes the stocks of the brownest firms; passive investors hold a value-weighted index of all stocks; and active investors hold a mean-variance efficient portfolio of all stocks. Contrary to the literature, we find large drops in the stock prices of the brownest firms and moderate increases for greener firms. These effects occur primarily upon the announcement of the green index's formation and continue during the exclusion phase. The announcement effects imply a first-mover advantage to early adopters of decarbonisation strategies.

Suggested Citation

  • Cheng, Gong & Jondeau, Eric & Mojon, Benoit & Vayanos, Dimitri, 2024. "The Impact of Green Investors on Stock Prices," CEPR Discussion Papers 18906, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18906
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    References listed on IDEAS

    as
    1. Andrea M. Buffa & Dimitri Vayanos & Paul Woolley, 2022. "Asset Management Contracts and Equilibrium Prices," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3146-3201.
    2. Ariel K. H. Lui & Maggie C. M. Lee & Eric W. T. Ngai, 2022. "Impact of artificial intelligence investment on firm value," Annals of Operations Research, Springer, vol. 308(1), pages 373-388, January.
    3. Philippe van der Beck & Coralie Jaunin, 2021. "The Equity Market Implications of the Retail Investment Boom," Swiss Finance Institute Research Paper Series 21-12, Swiss Finance Institute.
    4. Philippe van der Beck, 2021. "Flow-Driven ESG Returns," Swiss Finance Institute Research Paper Series 21-71, Swiss Finance Institute.
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    More about this item

    Keywords

    Green investment; Asset pricing; Climate change;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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