THE EFFECTS OF #ESG ON STOCK RETURNS

Abstract

Twitter is one of the most powerful social media platforms. Previous studies have linked Twitter sentiments to fluctuations in the stock market. This study investigated the Environmental, Social, and Governance (ESG) hashtags created by brands, focusing mainly on their social content and the sentiments of Twitter users towards them, such as sharing positive messages, encouraging them to enjoy spring safely during the current pandemic, mental health awareness, and celebrating women’s achievements. The study demonstrated that positive social content created by a brand is positively received by Twitter users. Event study methodology was used to analyse the effect on the stock market of hashtags created by eight brands. The study showed that, for half of the sampled hashtags, positive hashtags correlated with a rise in the abnormal returns and the cumulative abnormal returns from the day of the event until five days later. Therefore, I created a portfolio of the stocks and determined that positive hashtags positively affected the cumulative abnormal returns of the portfolio.