In this article, we analyze the possibility to do well, while doing good from a passive portfolio management strategy. In this analysis, we distinguish the regions Europe and the US and refer to the stock price data of composites from the most important indices in these regions. Based on these,...

This paper studies the impact of environmental, social, and governance (ESG) ratings on investors' preferences and stock prices. We exploit a change in ESG rating methodology that non-linearly shifted ESG ratings for firms as a natural experiment. We show that the 'pseudo'-changes in the ESG...

We propose a theory in which each stock's environmental, social, and governance (ESG) score plays two roles: 1) providing information about firm fundamentals and 2) affecting investor preferences. The solution to the investor's portfolio problem is characterized by an ESG-efficient frontier,...

Using 2010-2019 stock-level data in US, we examine whether and how retail investors trade on environmental, social, and government (ESG) information. Although retail investors trade more on ESG disclosed stocks than no-disclosed stocks, ESG disclosure information does not help retail investors...

We analyze survey data on ESG beliefs and preferences in a large panel of retail investors linked to administrative data on their investment portfolios. The survey elicits investors’ expectations of long-term ESG equity returns and asks about their motivations, if any, to invest in ESG assets....

This paper studies whether green investors can influence corporate greenhouse gas emissions through capital markets, either by divesting their stock and limiting polluters' access to capital, or holding polluters' stock and engaging with management. We focus on public pension funds, classifying...

We exploit a modification to Sustainalytics' environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some...

We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic, as well as during the subsequent partial stock market recovery. We surveyed retail investors who are clients of Vanguard at...

We use unique data fromfinancial advisers' professional exam scores and combine it with other variables to create an index of financial sophistication. Using this index to explain long-term stock return expectations, we find that more sophisticated financial advisers tend to have lower return...

We use data from financial advisers' professional exam scores and other variables to build an index of financial sophistication. A one standard deviation reduction in sophistication increases long-term expected returns quoted to clients by 1.1 percentage points, and twice as much for emerging...