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 :

July 01 2020
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Keywords

  • ESG • 
  • CSR • 
  • COVID-19 • 
  • market crash • 
  • exogenous shock • 
  • stock returns • 
  • volatility • 
  • customer loyalty • 
  • investor loyalty

The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of environmental and social (ES) policies.

This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of
2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks.

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Authors

Real name:
Shuai Yang
Real name:
Chendi Zhang