The Effects of Environmental Announcements on Exchange Traded Funds

ABSTRACTWe investigate the impact of environmental announcements on Exchange Traded Funds (ETFs) constituted of either polluting or green firms for the period 2006 to 2014. Using an event study methodology, we examine whether these public environmental announcements add or remove value for ETF investors. Our results identify that few environmental announcements produce statistically significant abnormal returns. For the significant announcements, we find mixed results for both polluting and green ETFs. Our findings indicate that environmental announcements are only partially effective in transmitting information to industries sensitive to the news incorporated in these announcements. We also show that, at times, these announcements can cause large abnormal returns over longer horizons.