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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Social Responsibility in the Time of Uncertainty: A Natural Experiment |
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| Institution | University of Zurich |
| Series Name | - |
| Number | - |
| Abstract Text | This paper studies social responsibility in the financial market under uncertainty. Using the COVID-19 induced stock market crash as a natural experiment, we present causal evidence for a significant market-wide increase in sentiment for and attention to socially responsible investments. An artefactual field experiment suggests three behavioral channels for this shift in preferences. First, investors view socially responsible assets as less risky and uncertain. Second, the crisis triggered an increase in prosocial preferences in general. Third, the affect heuristic, in which the emotional response acts as a mental shortcut in relation to a stimulus, triggers favorable expectations of socially responsible investment performance. Our insights provide evidence for the time varying nature of morality in the market and may explain the recently documented resilience of socially responsible stocks in times of market turmoil. |
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