No. 1371 - Mutual fund trading and ESG stock resilience during the Covid-19 stock market crash

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by Rui Albuquerque, Yrjö Koskinen and Raffaele SantioniJune 2022

This paper analyses whether the trading behaviour of actively managed US equity mutual funds contributed to the resilience of ESG firms' securities during the market crash of February and March 2020, after the outbreak of the Covid-19 pandemic.

Environmental, Social, and Governance funds, and to a lesser extent non-ESG funds, contributed to the documented resilience of ESG stocks by buying them aggressively, conditional on the same level of inflows. Surprisingly, we find that both ESG and non-ESG funds sold their non-ESG stocks more aggressively during the crash, for the same level of outflows, thus also contributing to the relatively better performance of ESG stocks during the crash.