DP16477 Mutual Fund Trading and ESG Stock Resilience During the COVID-19 Stock Market Crash

Author(s): Rui Albuquerque, Yrjo Koskinen, Raffaele Santioni
Publication Date: August 2021
Date Revised: February 2022
Keyword(s): clientelee‚?Ķects, Environmentalandsocialresponsibility, Fund flows, investor horizon, Stock Market Crash
JEL(s): G01, G12, G23, G32, M14
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16477

Using proprietary monthly holdings data from Morningstar, we show that Envi- ronmental, Social, and Governance funds' trading during the COVID-19 market crash was consistent with catering to their clientele. Thus, ESG funds helped to stabilize the market for ESG stocks, but interestingly non-ESG funds did that as well. First, all funds experiencing inflows helped to stabilize the market during the crash by increasing net purchases per dollar of inflows. This behavior was more pronounced for ESG funds. Second, non-ESG funds experiencing outflows increased their net sales per dollar of outflow for non-ESG stocks, tilting their portfolios towards ESG stocks.