Mutual Fund Trading and ESG Clientele During the COVID-19 Stock Market Crash

Mutual Fund Trading and ESG Clientele During the COVID-19 Stock Market Crash

Rui Albuquerque, Yrjö Koskinen, Raffaele Santioni

Series number :

Serial Number: 
782/2021

Date posted :

September 09 2021

Last revised :

September 09 2021
SSRN Share

Keywords

  • Environmental and social responsibility • 
  • clientele effects • 
  • investor horizon • 
  • Fund Flows • 
  • stock market crash

This paper studies trading behavior of actively managed equity mutual funds comparing Environmental, Social and Governance (ESG) and conventional funds during a market collapse. Using monthly holdings data and the COVID-19 market crash as a quasi-natural experiment, we find that ESG funds maintained a stable share of their portfolio in ESG stocks in response to fund flows during the crash.

In contrast, conventional funds, who experienced outflows the most, increased their net sales to flows for ESG and non-ESG stocks. Results are consistent with ESG funds catering to their clientele in market downturns, contributing to market stability for ESG stocks.

Authors

Real name:
Raffaele Santioni