Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections

77 Pages Posted: 2 Oct 2018 Last revised: 15 Mar 2021

See all articles by Stefano Ramelli

Stefano Ramelli

University of Zurich - Department of Banking and Finance

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Alexandre Ziegler

University of Zurich - Department of Banking and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: September 2018

Abstract

Donald Trump's 2016 election and his nomination of climate skeptic Scott Pruitt to head the Environmental Protection Agency drastically downshifted expectations on U.S. policy toward climate change. Joseph Biden's 2020 election shifted them dramatically upward. We study firms' stock-price movements in reaction. As expected, the 2016 election boosted carbon-intensive firms. Surprisingly, firms with climate-responsible strategies also gained, especially those firms held by long-run investors. Such investors appear to have bet on a "boomerang" in climate policy. Harbingers of a boomerang already appeared during Trump's term. The 2020 election marked its arrival.

JEL Classification: G14, G38

Suggested Citation

Ramelli, Stefano and Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre, Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections (September 2018). CEPR Discussion Paper No. DP13206, Available at SSRN: https://ssrn.com/abstract=3259368

Stefano Ramelli (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

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Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

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Zürich, 8032
Switzerland
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Centre for Economic Policy Research (CEPR) ( email )

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Swiss Finance Institute ( email )

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Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Alexandre Ziegler

University of Zurich - Department of Banking and Finance ( email )

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Zürich, 8032
Switzerland

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