Dissecting Green Returns

WEBINAR, November 2021

Robert Stambaugh, the Miller Anderson & Sherrerd Professor of Finance at the Wharton School, presented his paper Dissecting Green Returns. The paper continues research by Stambaugh and his co-authors, Lubos Pastor of the University of Chicago Booth School of Business and Lucian Taylor of Wharton, on ESG investing and the performance of green assets. It received  the 2021 Jacobs Levy Center Research Paper Prize for Best Paper. Stambaugh presented their previous paper Sustainable Investing in Equilibrium in a webinar for the Jacobs Levy Center last fall.

Lu Zhang, The John W. Galbreath Chair at Fisher College of Business, The Ohio State University, gave a discussion of the paper, followed by a live audience Q&A. Chris Geczy, Academic Director of the Jacobs Levy Center, hosted the webinar.


Green assets delivered high returns in recent years. This performance reflects unexpectedly strong increases in environmental concerns, not high expected returns. German green bonds outperformed their higher-yielding non-green twins as the “greenium” widened, and U.S. green stocks outperformed brown as climate concerns strengthened. To show the latter, we construct a theoretically motivated green factor—a return spread between environmentally friendly and unfriendly stocks—and find that its positive performance disappears without climate-concern shocks. A theory-driven two-factor model featuring the green factor explains much of the recent underperformance of value stocks. Our evidence also suggests small stocks underreact to climate news.


When Bad News About the Climate Is Good for Green Stocks
The New York Times | November 5, 2021

Research on ESG returns wins Jacobs Levy prize
Pensions & Investments | November 1, 2021

ESG loyalty will be tested as performance starts to lag
InvestmentNews | September 14, 2021

ESG performance won’t last, academics warn
FT Advisor | September 10, 2021

What lies behind the returns from ESG investing?
MoneyWeek | July 5, 2021

Why Green Assets May Not Continue to Outperform
Knowledge@Wharton | June 29, 2021

New Report Suggests ESG Returns Might Not Have Been as Successful Without Concerns Around Climate
Wharton Business Daily | June 24, 2021

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.

Lu Zhang

The John W. Galbreath Chair, Fisher College of Business, The Ohio State University

Lu Zhang is The John W. Galbreath Chair of Finance at Fisher College of Business, The Ohio State University, and a research associate at the National Bureau of Economic Research (asset pricing program). He is the founding president of the Macro Finance Society, an international academic society devoted to advancing and disseminating high-quality research at the intersection of financial economics and macroeconomics.

Zhang’s research provides a unified conceptual framework for understanding asset pricing anomalies. The Hou-Xue-Zhang (2015) q-factor model is a leading workhorse factor pricing model. His recent theoretical work shows how labor market frictions give rise endogenously to economic disasters. One chapter of his 2002 Wharton doctoral thesis titled “The Value Premium” won the Smith-Breeden Award for Best Paper for 2005 from the American Finance Association and the Journal of Finance. His 2019 article on “Which Factors?” (with Hou, Mo, and Xue) won the Spängler IQAM Best Paper Prize for the best investments paper published in the Review of Finance from the European Finance Association. His research has frequently been featured in the Wall Street Journal, Bloomberg, and the Economist.

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.