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Herding and Anti-Herding Across ESG Funds

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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.

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  • Rocco Ciciretti & Ambrogio Dalò & Giovanni Ferri, 2021. "Herding and Anti-Herding Across ESG Funds," CEIS Research Paper 524, Tor Vergata University, CEIS, revised 05 Nov 2021.
    • Handle: RePEc:rtv:ceisrp:524
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    More about this item

    Keywords

    ESG investing; Equity Funds; Herding; Anti-Herding; Risk-Adjusted Returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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