Socially Conscious Investors Mitigating Stock Market Losses in A Time of Crisis: Evidence from the COVID-19 Crash

Recent years have witnessed a surge in investors with a socially responsible investment mandate. We study stock returns associated with this practice in the COVID-19 crash and surrounding months. Stocks with greater socially responsible investor demand experience superior returns, lower volatility, and weaker market valuation decline during the crash. These effects disappear post-crash. No differences are found with respect to sales, gross profitability, and operating income as well as expectations about the long-term growth rate of earnings per share. These results suggest that socially responsible investors can act as a moderating force by mitigating losses in a time of crisis.