Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

Rui Albuquerque, Yrjö Koskinen, Shuai Yang, Chendi Zhang

Series number :

Serial Number: 
676/2020

Date posted :

April 23 2020

Last revised :

May 13 2020
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Keywords

  • ESG • 
  • COVID-19 • 
  • market crash • 
  • stock returns • 
  • volatility • 
  • customer loyalty

The COVID-19 pandemic and the subsequent lockdown brought about a massive slowdown of the economy and an unparalleled stock market crash. Using U.S. data, this paper explores how firms with high Environmental and Social (ES) ratings fare during the first quarter of 2020 compared to other firms.

We show that stocks with high ES ratings have significantly higher returns and lower return volatilities than other stocks. Firms with high ES ratings and high advertising expenditures perform especially well during the crash. This paper highlights the importance of ES policies in making firms more resilient during a time of crisis

Authors

Real name:
Yrjö Koskinen
Real name:
Shuai Yang
Real name:
Chendi Zhang