Warm-Glow Investment and the Under-Performance of Green Stocks

Johannes Kabderian Dreyer*, Vivek Sharma, William T. Smith

*Corresponding author

Publikation: KonferencebidragPaperForskningpeer review


In this paper we develop a novel theory to explain why green stocks should underperform relative to conventional stocks. We assume that investors derive utility from the act of investing in green stocks – what we call “warm-glow” investment. We derive the theoretical implications of these preferences in a model that is an extension of the CCAPM. We estimate the model using the Generalized Method of Moments. Our estimates of the strength of the preference for warm-glow are statistically significant, but economically insignificant before the financial crisis. After the crisis they are both statistically and economically significant.
StatusUdgivet - 2020
BegivenhedFinancial Management Association Virtual Conference 2020 -
Varighed: 19 okt. 202023 okt. 2020


KonferenceFinancial Management Association Virtual Conference 2020

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