SFDR, investor attention, and European financial markets

Project Description

Highlights
• This study investigates whether investor attention toward the sustainable finance disclosure regulation (SFDR) leads European financial markets during the years 2019–2022.
• To identify the investor attention towards the SFDR we use the Google search volume index.
• Results suggest investor attention has a strong predictive power on the financial markets, mostly during bearish and normal market conditions.
• The sensitivity at lower-middle quantiles suggests that regulation may mostly affect financial markets when other negative conditions occur (e.g., geopolitical uncertainty or pandemic emergency).
Abstract
This study investigates whether investor attention to the Sustainable Finance Disclosure Regulation (SFDR) leads European financial markets during the years 2019–2022. Using the nonparametric causality-in-quantiles method, results suggest investor attention has a strong predictive power on the financial markets, mostly during bearish and normal market conditions. Findings are robust to several alternative tests. Our research contributes to the literature on the link between investor attention and financial markets, and on the sustainable finance research stream, with relevant implications for asset managers.