Sustainable Investing in Equilibrium

Webinar, October 2020

Robert Stambaugh, the Miller Anderson & Sherrerd Professor of Finance at the Wharton School, presented his working paper Sustainable Investing in Equilibrium. Co-authored with Lubos Pastor of the University of Chicago Booth School of Business and Lucian Taylor of Wharton, the paper is forthcoming in the Journal of Financial Economics.

Harrison Hong, the John R. Eckel, Jr. Professor of Financial Economics at Columbia University, gave a discussion of the paper, followed by a live audience Q&A. The webinar was hosted by Chris Geczy, Academic Director of the Jacobs Levy Center.


The authors model investing that considers environmental, social, and governance (ESG) criteria. In equilibrium, green assets have low expected returns because investors enjoy holding them and because green assets hedge climate risk. Green assets nevertheless outperform when positive shocks hit the ESG factor, which captures shifts in customers’ tastes for green products and investors’ tastes for green holdings. The ESG factor and the market portfolio price assets in a two-factor model. The ESG investment industry is largest when investors’ ESG preferences differ most. Sustainable investing produces positive social impact by making firms greener and by shifting real investment toward green firms.

The paper received a 2020 Jacobs Levy Center Research Paper Prize for Outstanding Paper. The research was also featured in a story by Knowledge@Wharton.

Robert Stambaugh

Miller Anderson & Sherrerd Professor of Finance, The Wharton School


Robert Stambaugh is the Miller Anderson & Sherrerd Professor of Finance at the Wharton School of the University of Pennsylvania. He is a fellow and former president of the American Finance Association, a fellow of the Financial Management Association, and a research associate of the National Bureau of Economic Research.

Stambaugh has been the editor of the Journal of Finance, an editor of the Review of Financial Studies, an associate editor of those journals as well as the Journal of Financial Economics, and a member of the first editorial committee of the Annual Review of Financial Economics. He has published articles on topics including return predictability, asset pricing tests, portfolio choice, parameter uncertainty, liquidity risk, volatility, performance evaluation, investor sentiment, and active-versus-passive investing.  His research awards include a Smith-Breeden first prize for an article in the Journal of Finance as well as a Fama-DFA first prize and three second prizes for articles in the Journal of Financial Economics.

Before joining Wharton in 1988, he was Professor of Finance at the University of Chicago, where he received his PhD in 1981. Stambaugh visited Harvard University as a Marvin Bower Fellow in 1997-98.

Harrison Hong

Professor of Economics, Columbia University


Harrison Hong is Professor of Economics at Columbia University, where he teaches courses in the undergraduate and PhD programs. He is currently the John R. Eckel Jr. Professor of Financial Economics. Before coming to Columbia in 2016, he was on the economics faculty of Princeton University, most recently as the John Scully ’66 Professor of Economics and Finance. Prior to that, he was an assistant professor of finance at the Stanford Graduate School of Business from 1997-2001.

He has contributed to a number of topics in financial economics, especially on behavioral finance and stock market efficiency. Topics include disagreement in asset markets, speculative bubbles and crashes, frictions and arbitrage, strategic bias among professional forecasters, scale and performance in asset management, social networks and investments, compensation and bank risk-taking, and corporate sustainability and climate change risks.

In 2009, Hong was awarded the Fischer Black Prize, given once every two years to the best American finance economist under the age of 40. He has received several honorary doctorates. He is a research associate at the National Bureau of Economic Research and an editor of the International Journal of Central Banking. He has been an associate editor at the Journal of Finance and Journal of Financial Intermediation, and a Director of the American Finance Association

Hong received his bachelor’s degree in economics and statistics with highest distinction from the University of California at Berkeley in and his doctorate in economics from M.I.T.

Chris Geczy

Adjunct Professor of Finance and Academic Director, Jacobs Levy Equity Management Center for Quantitative Financial Research, The Wharton School


Chris Geczy has been on the Finance Department faculty at the Wharton School since 1997. He is academic director of the Jacobs Levy Equity Management Center for Quantitative Financial Research and the Wharton Wealth Management Initiative at Wharton Executive Education. He previously worked for the Board of Governors of the Federal Reserve System, Washington, DC in its Division of Research and Statistics.

He currently serves on Intel’s U.S. Retirement Plans’ Investment Policy Committee, is a co-editor of Financial Planning Review, and formerly served on the Editorial Board of the Journal of Alternative Investments and the Economic Advisory Board of NASDAQ. His work has appeared in numerous books and scholarly journals including the Journal of FinanceJournal of Financial EconomicsJournal of Portfolio Management, The Society for Industrial and Organizational Psychology and the Journal of Political Economy.

In 2018, Geczy and co-authors won the Investment for Impact Prize of the Center for Responsible Business at the University of California, Berkeley’s Haas School of Business for their research paper “Contracts With Benefits: The Implementation of Impact Investing.”

He has a bachelor’s degree in economics from the University of Pennsylvania and a doctorate in finance and econometrics from the Graduate School of Business at the University of Chicago.