Feedback trading in socially responsible ETFs: Does geopolitical risk matter?

Socially responsible ETFs have grown in popularity as investors seek socially conscious investments. This study examines feedback trading in U.S.-listed socially responsible ETFs from 2019 to 2023 using asymmetrical GARCH models. The results indicate that investors exhibit positive feedback (momentum) trading, and this behavior intensifies when geopolitical risk (GPR) decreases. This study is the first to link feedback trading in socially responsible ETFs to GPR, highlighting how behavioral factors and risk perceptions influence market dynamics. The findings have important implications for ETF investors and regulators, offering insights into investment behavior and the interaction between risk and trading patterns.