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.
Authors
- Acknowledgements & Disclosure
- We thank participants in the BIS Research Meeting and the NGFS Expert Network on Research webinar series for their constructive comments, and Jingtong Zhang for excellent research assistance. The project started when Gong Cheng was at the BIS. The views presented in this paper are those of the authors and do not necessarily reflect those of the BIS, nor those of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32317
- Published in
- United States of America
