Mutual Fund Trading and ESG Stock Resilience during the COVID-19 Stock Market Crash
71 Pages Posted: 23 Aug 2021 Last revised: 15 Feb 2022
Date Written: February 14, 2022
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.
Keywords: Environmental and social responsibility, clientele effects, fund flows, investor horizon, stock market crash
JEL Classification: G01, G12, G23, G32, M14
Suggested Citation: Suggested Citation