Wirtschaftswissenschaften
Refine
Year of publication
- 2022 (171) (remove)
Document Type
- Working Paper (99)
- Part of Periodical (55)
- Article (7)
- Contribution to a Periodical (5)
- Book (4)
- Part of a Book (1)
Has Fulltext
- yes (171)
Is part of the Bibliography
- no (171) (remove)
Keywords
- regulation (5)
- financial markets (4)
- ESG (3)
- inflation (3)
- AI borrower classification (2)
- AI enabled credit scoring (2)
- Artificial Intelligence (2)
- Banking Union (2)
- Big Data (2)
- COVID-19 (2)
- Experiment (2)
- FOMC (2)
- FinTech (2)
- Financial Regulation (2)
- GDPR (2)
- Germany (2)
- Household Finance (2)
- Market Liquidity (2)
- Performance (2)
- Sustainability (2)
- Transparency (2)
- banking regulation (2)
- brown-spinning (2)
- climate change (2)
- coronavirus (2)
- corporate finance (2)
- credit scoring methodology (2)
- credit scoring regulation (2)
- financial privacy (2)
- financial stability (2)
- household income (2)
- natural gas (2)
- peer effects (2)
- political economy (2)
- portfolio management (2)
- private companies (2)
- private equity (2)
- public debt (2)
- responsible lending (2)
- social media (2)
- statistical discrimination (2)
- 2-Sector Model (1)
- 401(k) plan (1)
- Affordability crisis (1)
- Agile methods (1)
- Antitrust (1)
- Art investment (1)
- Asset Pricing (1)
- Asset prices (1)
- Bailin (1)
- Bank Accounting (1)
- Bank's Balance Sheets (1)
- Banking (1)
- Banks (1)
- Bayesian Estimation (1)
- Behavioral Finance (1)
- Behavioral Measurement (1)
- Beliefs (1)
- Bias in medical research (1)
- Big Five Personality (1)
- Big data (1)
- Blockchain (1)
- Broker (1)
- Business Subsidies (1)
- CBDC (1)
- CCPA (1)
- CECL (1)
- Carbon Taxation (1)
- Cash (1)
- Causal Machine Learning (1)
- Choice under Risk (1)
- Cholesky decomposition (1)
- Climate Change (1)
- Coalitions (1)
- Colocation (1)
- Complex Financial Instruments (1)
- Consumer Welfare (1)
- Corporate concentration (1)
- Covid pandemic (1)
- Covid-19 (1)
- Cultural Finance (1)
- Customer data sharing (1)
- Cybersecurity (1)
- DSGE (1)
- DSGE models (1)
- Data access (1)
- Data portability (1)
- Data protection (1)
- Digital footprints (1)
- Digital service chain (1)
- Disclosure (1)
- Disclosure regulation (1)
- ESM (1)
- Economic and Monetary Union (1)
- Energy Embargo (1)
- Enriched Digital Footprint (1)
- Environmental (1)
- Environmental, social, and governance factors (ESG) (1)
- Estimation (1)
- Ethical issues (1)
- Ethics (1)
- European Banking Union (1)
- European Capital Markets Union (1)
- European Central Bank (1)
- European Commission (1)
- European Investment Bank (1)
- European Parliament (1)
- European Stability Mechanism (1)
- European integration (1)
- Eurozone (1)
- Execution Cost (1)
- Expected credit losses (1)
- Externalities (1)
- FinTechs (1)
- Financial Supervision (1)
- Financial interests (1)
- Fintech (1)
- Fixed Income (1)
- Forecasting (1)
- Fund family (1)
- Gambling (1)
- Generationenrente (1)
- Generations (1)
- Global Optimization (1)
- Governance (1)
- Green Nudging (1)
- Green Quantitative Easing (1)
- Greenwashing (1)
- Headline (1)
- Heterogeneous Agents (1)
- Heterogeneous Firms (1)
- High-Frequency Trading (1)
- History & Finance (1)
- Household finance (1)
- IFRS 9 (1)
- IPS (1)
- IV (1)
- IV approach (1)
- Idiosyncratic Risk (1)
- Impairments (1)
- Institutional Investor (1)
- Integrated Assessment Model (1)
- Invasion (1)
- LBO spillovers (1)
- Lending (1)
- Life insurance companies (1)
- Limited Commitment (1)
- Limited Enforcement (1)
- Limits to Arbitrage (1)
- Liquidity (1)
- Liquidity Risk (1)
- Loans (1)
- Long-run risk (1)
- Lottery stocks (1)
- Maastricht criteria (1)
- Marginal Propensity to Consume (1)
- Market Fragmentation (1)
- Market Microstructure (1)
- Market Quality (1)
- Marketplace lending (1)
- Mixed-frequency data (1)
- Model-based regulation (1)
- Monte Carlo Methods (1)
- Morality (1)
- NFT (1)
- Nachhaltigkeit (1)
- Non-Fungible Tokens (1)
- Numerical accuracy (1)
- Online Poker (1)
- Open banking (1)
- P2P lending (1)
- PIPL (1)
- Paycheck Protection Program (1)
- Paycheck Sensitivity (1)
- Persistence (1)
- Pivotality (1)
- Political Economy (1)
- Portfolio optimization (1)
- Price elasticity of gasoline demand (1)
- Pricing Determinants (1)
- Product returns (1)
- Prosociality (1)
- Public Finance (1)
- Real estate (1)
- Reallocation (1)
- Regulation (1)
- Rents (1)
- Research and development (1)
- Retail Challenge (1)
- Retail investors (1)
- Risk Attitudes (1)
- Risk Preferences (1)
- Risk Sharing (1)
- Russia (1)
- Russian Sanction (1)
- SME Trading (1)
- SRB (1)
- SRF (1)
- SVAR (1)
- SWIFT (1)
- Scrum (1)
- Securities Market Regulation (1)
- Short-run and long-run inflation expectations (1)
- Short-time work (1)
- Social (1)
- Social Impact (1)
- Social Learning (1)
- Social Security claiming (1)
- Socially responsible investments (1)
- Solution methods (1)
- Solvency regulation (1)
- Stability and Growth Pact (1)
- States (1)
- Stationary Equilibrium (1)
- Subsidization (1)
- Supervision (1)
- Supply Chain (1)
- Survey Data (1)
- Swiss Army Knife (1)
- Temporal aggregation (1)
- Textual Analysis (1)
- Time Inconsistency (1)
- Time Preferences (1)
- Transaction Data (1)
- Ukraine (1)
- Universal banks (1)
- Venture capital (1)
- Volcker Rule (1)
- Wettbewerbsrecht (1)
- accountability (1)
- ad blocker (1)
- annuity (1)
- art (1)
- asset valuation (1)
- asymmetric information (1)
- auctions (1)
- bail-in (1)
- bank regulation (1)
- bank resolution (1)
- banking (1)
- banking union (1)
- banknotes (1)
- banks (1)
- belief formation (1)
- beliefs (1)
- betting (1)
- biases (1)
- big data (1)
- bitcoin (1)
- blockchain (1)
- bond market liquidity (1)
- bureaucrats' incentives (1)
- business cycle (1)
- capital regulation (1)
- capital requirements (1)
- central bank communication (1)
- climate (1)
- climate-related disclosures (1)
- coal (1)
- collateral reuse (1)
- computer vision (1)
- computer visionbiases (1)
- conditionality (1)
- continuous limit order book (1)
- core (1)
- credit risk (1)
- creditors runs (1)
- crises (1)
- cross-equation restrictions of rational expectations (1)
- cross-section (1)
- cryptocurrencies (1)
- debt cost (1)
- democracy (1)
- deposit guarantee scheme (1)
- derivatives (1)
- diesel (1)
- digital planning tool (1)
- disagreement (1)
- disaster risk (1)
- discourse analysis (1)
- discrimination (1)
- economic governance (1)
- economies of scale (1)
- electricity (1)
- endogeneity (1)
- energy crisis (1)
- equity cost (1)
- experts (1)
- external instruments (1)
- factorization of matrix polynomials (1)
- filtering (1)
- finance (1)
- finance and development (1)
- finance wage premium (1)
- financial distress (1)
- financial solidarity (1)
- fintech (1)
- fiscal rules (1)
- fiscal solidarity (1)
- frequent batch auctions (1)
- gasoline (1)
- gasoline supply (1)
- gasoline tax (1)
- geo-economics (1)
- government bonds (1)
- green financing (1)
- high-frequency trading (1)
- identification (1)
- inequality (1)
- inflation expectations (1)
- inflation surge (1)
- insider trading (1)
- institutions (1)
- investment behavior (1)
- investment decisions (1)
- investment forum (1)
- jet fuel (1)
- kapitalgedeckte Alterssicherung (1)
- labelling (1)
- latency arbitrage (1)
- leverage constraint (1)
- life expectancy (1)
- liquidity provision (1)
- loanable funds (1)
- longevity (1)
- machine learning (1)
- market design (1)
- market microstructure (1)
- market supervision (1)
- market-making (1)
- monetary policy (1)
- monetary policy rule (1)
- monetary system (1)
- monetary transmission (1)
- monetization of content (1)
- money (1)
- money creation (1)
- moral hazar (1)
- motivated reasoning (1)
- national interest (1)
- neoinstitutionalism (1)
- net zero transition (1)
- net-zero transition (1)
- news consumption (1)
- oil (1)
- online advertising (1)
- opinion (1)
- orthogonalization (1)
- pass-through (1)
- pensions (1)
- persistent or transitory inflation shock (1)
- polarization (1)
- policy reform (1)
- policy rule (1)
- price stability (1)
- property rights (1)
- proprietary trading (1)
- randomized control trial (1)
- randomized controlled trial (1)
- reconciliation of Lucas's advocacy of rational-expectations modelling and policy predictions and Sims's advocacy of VAR modelling (1)
- recursive utility (1)
- rehypothecation (1)
- repo market (1)
- retirement (1)
- retirement expectations (1)
- retirement planning (1)
- risk preference (1)
- safe assets (1)
- saving behavior (1)
- savings banks (1)
- securities lending (1)
- simultaneity (1)
- skill-biased technological change (1)
- sniping (1)
- social impact (1)
- social networks (1)
- sovereign bonds (1)
- sovereign debt (1)
- stabilization (1)
- stock market investment (1)
- structural power (1)
- survey (1)
- survey experiment (1)
- survey forecasts (1)
- sustainability (1)
- sustainability disclosures (1)
- tax arbitrage (1)
- taxes (1)
- uncertainty (1)
- venture capital (1)
- worker-firm panels (1)
Institute
- Wirtschaftswissenschaften (171)
- Sustainable Architecture for Finance in Europe (SAFE) (126)
- Center for Financial Studies (CFS) (86)
- House of Finance (HoF) (67)
- Foundation of Law and Finance (18)
- Rechtswissenschaft (15)
- Institute for Monetary and Financial Stability (IMFS) (14)
- Präsidium (9)
- E-Finance Lab e.V. (3)
- Gesellschaftswissenschaften (3)
The importance of agile methods has increased in recent years, not only to manage IT projects but also to establish flexible and adaptive organisational structures, which are essential to deal with disruptive changes and build successful digital business strategies. This paper takes an industry-specific perspective by analysing the dissemination, objectives and relative popularity of agile frameworks in the German banking sector. The data provides insights into expectations and experiences associated with agile methods and indicates possible implementation hurdles and success factors. Our research provides the first comprehensive analysis of agile methods in the German banking sector. The comparison with a selected number of fintechs has revealed some differences between banks and fintechs. We found that almost all banks and fintechs apply agile methods in IT projects. However, fintechs have relatively more experience with agile methods than banks and use them more intensively. Scrum is the most relevant framework used in practice. Scaled agile frameworks are so far negligible in the German banking sector. Acceleration of projects is apparently the most important objective of deploying agile methods. In addition, agile methods can contribute to cost savings and lead to improved quality and innovation performance, though for banks it is evidently more challenging to reach their respective targets than for fintechs. Overall our findings suggest that German banks are still in a maturing process of becoming more agile and that there is room for an accelerated adoption of agile methods in general and scaled agile frameworks in particular.
The financial sector plays an important role in supporting the green transformation of the European economy. A critical assessment of the current regulatory framework for sustainable finance in Europe leads to ambiguous results. Although the level of transparency on environmental, social and governance aspects of financial products has improved significantly, it is questionable whether the complex, mainly disclosure-oriented architecture is sufficient to mobilise more private capital into sustainable investments. It should be discussed whether a minimum taxonomy ratio or Green Asset Ratio has to be fulfilled to market a financial product as “green”. Furthermore, because of the high complexity of the regulation, it could be helpful for private investors to establish a simplified green rating, based on the taxonomy ratio, to facilitate the selection of green financial products.
The German federal government intended to alleviate the burden of increasing fuel prices by introducing a temporary reduction of energy taxes on gasoline and diesel. In order to evaluate the impact of this measure on consumer prices at the filling stations the development of procurement costs for crude oil as well as the downstream development of refinery and distribution margins have to be taken into account. It turns out that about 80 % of the tax reduction has been passed on to end consumers on and around the effective date of the tax relief. However, within the first month the impact of the tax reduction has been wiped out for diesel completely as the gross margin of the mineral oil groups have substantially improved since then. On the other hand, for gasoline (E10) at least part of the impact can still be observed as the initial margin improvement has come down in the meantime. For a detailed analysis the German antitrust authority should look into the pricing algorithms of all 14,000 filling stations in Germany.
Ad blockers allow users to browse websites without viewing ads. Online news publishers that rely on advertising income tend to perceive users’ adoption of ad blockers purely as a threat to revenue. Yet, this perception ignores the possibility that avoiding ads—which users presumably dislike—may affect users’ online news consumption behavior in positive ways. Using 3.1 million visits from 79,856 registered users on a news website, this research finds that ad blocker adoption has robust positive effects on the quantity and variety of articles users consume. Specifically, ad blocker adoption increases the number of articles that users read by 21.0%–43.2%, and it increases the number of content categories that users consume by 13.4%–29.1%. These effects are stronger for less-experienced users of the website. The increase in news consumption stems from increases in repeat visits to the news website, rather than in the number of page impressions per visit. These postadoption visits tend to start from direct navigation to the news website, rather than from referral sources. The authors discuss how news publishers could benefit from these findings, including exploring revenue models that consider users’ desire to avoid ads.
A common element of market structure analysis is the spatial representation of firms’ competitive positions on maps. Such maps typically capture static snapshots in time. Yet, competitive positions tend to change. Embedded in such changes are firms’ trajectories, that is, the series of changes in firms’ positions over time relative to all other firms in a market. Identifying these trajectories contributes to market structure analysis by providing a forward-looking perspective on competition, revealing firms’ (re)positioning strategies and indicating strategy effectiveness. To unlock these insights, we propose EvoMap, a novel dynamic mapping framework that identifies firms’ trajectories from high-frequency and potentially noisy data. We validate EvoMap via extensive simulations and apply it empirically to study the trajectories of more than 1,000 publicly listed firms over 20 years. We find substantial changes in several firms’ positioning strategies, including Apple, Walmart, and Capital One. Because EvoMap accommodates a wide range of mapping methods, analysts can easily apply it in other empirical settings and to data from various sources.
Regulators worldwide have been implementing different privacy laws. They vary in their impact on the value for advertisers, publishers and users, but not much is known about these differences. This article focuses on three important privacy laws (i.e., General Data Protection Regulation [GDPR], California Consumer Privacy Act [CCPA] and Personal Information Protection Law [PIPL]) and compares their impact on the value for the three primary actors of the online advertising market, namely, advertisers, publishers and users. This article first compares these three privacy laws by developing a legal strictness score. It then uses the existing literature to derive the effects of the legal strictness of each privacy law on each actor’s value. Finally, it quantifies the three privacy laws’ impact on each actor’s value. The results show that GDPR and PIPL are similar and stricter than CCPA. Stricter privacy laws bring larger negative changes to the value for actors. As a result, both GDPR and PIPL decrease the actors’ value more substantially than CCPA. These value declines are the largest for publishers and are rather similar for users and advertisers. Scholars and practitioners can use our findings to explore ways to create value for multiple actors under various privacy laws.
Socially responsible investing (SRI) continues to gain momentum in the financial market space for various reasons, starting with the looming effect of climate change and the drive toward a net-zero economy. Existing SRI approaches have included environmental, social, and governance (ESG) criteria as a further dimension to portfolio selection, but these approaches focus on classical investors and do not account for specific aspects of insurance companies. In this paper, we consider the stock selection problem of life insurance companies. In addition to stock risk, our model set-up includes other important market risk categories of insurers, namely interest rate risk and credit risk. In line with common standards in insurance solvency regulation, such as Solvency II, we measure risk using the solvency ratio, i.e. the ratio of the insurer’s market-based equity capital to the Value-at-Risk of all modeled risk categories. As a consequence, we employ a modification of Markowitz’s Portfolio Selection Theory by choosing the “solvency ratio” as a downside risk measure to obtain a feasible set of optimal portfolios in a three-dimensional (risk, return, and ESG) capital allocation plane. We find that for a given solvency ratio, stock portfolios with a moderate ESG level can lead to a higher expected return than those with a low ESG level. A highly ambitious ESG level, however, reduces the expected return. Because of the specific nature of a life insurer’s business model, the impact of the ESG level on the expected return of life insurers can substantially differ from the corresponding impact for classical investors.
We estimate the transmission of the pandemic shock in 2020 to prices in the residential and commercial real estate market by causal machine learning, using new granular data at the municipal level for Germany. We exploit differences in the incidence of Covid infections or short-time work at the municipal level for identification. In contrast to evidence for other countries, we find that the pandemic had only temporary negative effects on rents for some real estate types and increased asset prices of real estate particularly in the top price segment of commercial real estate.
This study analyzes information production and trading behavior of banks with lending relationships. We combine trade-by-trade supervisory data and credit-registry data to examine banks' proprietary trading in borrower stocks around a large number of corporate events. We find that relationship banks build up positive (negative) trading positions in the two weeks before events with positive (negative) news, even when these events are unscheduled, and unwind positions shortly after the event. This trading pattern is more pronounced in situations when banks are likely to possess private information about their borrowers, and cannot be explained by specialized expertise in certain industries or certain firms. The results suggest that banks' lending relationships inform their trading and underscore the potential for conflicts of interest in universal banking, which have been a prominent concern in the regulatory debate for a long time. Our analysis illustrates how combining large data sets can uncover unusual trading patterns and enhance the supervision of financial institutions.
A common practice in empirical macroeconomics is to examine alternative recursive orderings of the variables in structural vector autogressive (VAR) models. When the implied impulse responses look similar, the estimates are considered trustworthy. When they do not, the estimates are used to bound the true response without directly addressing the identification challenge. A leading example of this practice is the literature on the effects of uncertainty shocks on economic activity. We prove by counterexample that this practice is invalid in general, whether the data generating process is a structural VAR model or a dynamic stochastic general equilibrium model.
Financial ties between drug companies and medical researchers are thought to bias results published in medical journals. To enable readers to account for such bias, most medical journals require authors to disclose potential conflicts of interest. For such policies to be effective, conflict disclosure must modify readers’ beliefs. We therefore examine whether disclosure of financial ties with industry reduces article citations, indicating a discount. A challenge to estimating this effect is selection as drug companies may seek out higher quality authors as consultants or fund their studies, generating a positive correlation between disclosed conflicts and citations. Our analysis confirms this positive association. Including observable controls for article and author quality attenuates but does not eliminate this relation. To tease out whether other researchers discount articles with conflicts, we perform three tests. First, we show that the positive association is weaker for review articles, which are more susceptible to bias. Second, we examine article recommendations to family physicians by medical experts, who choose from articles that are a priori more homogenous in quality. Here, we find a significantly negative association between disclosure and expert recommendations, consistent with discounting. Third, we conduct an analysis within author and article, exploiting journal policy changes that result in conflict disclosure by an author. We examine the effect of this disclosure on citations to a previously published article by the same author. This analysis reveals a negative citation effect. Overall, we find evidence that disclosures negatively affect citations, consistent with the notion that other researchers discount articles with disclosed conflicts.
This paper characterizes the stationary equilibrium of a continuous-time neoclassical production economy with capital accumulation in which households can insure against idiosyncratic income risk through long-term insurance contracts. Insurance companies operating in perfectly competitive markets can commit to future contractual obligations, whereas households cannot. For the case in which household labor productivity takes two values, one of which is zero, and where households have logutility we provide a complete analytical characterization of the optimal consumption insurance contract, the stationary consumption distribution and the equilibrium aggregate capital stock and interest rate. Under parameter restrictions, there is a unique stationary equilibrium with partial consumption insurance and a stationary consumption distribution that takes a truncated Pareto form. The unique equilibrium interest rate (capital stock) is strictly decreasing (increasing) in income risk. The paper provides an analytically tractable alternative to the standard incomplete markets general equilibrium model developed in Aiyagari (1994) by retaining its physical structure, but substituting the assumed incomplete asset markets structure with one in which limits to consumption insurance emerge endogenously, as in Krueger and Uhlig (2006).
We analyze efficient risk-sharing arrangements when the value from deviating is determined endogenously by another risk sharing arrangement. Coalitions form to insure against idiosyncratic income risk. Self-enforcing contracts for both the original coalition and any coalition formed (joined) after deviations rely on a belief in future cooperation which we term "trust". We treat the contracting conditions of original and deviation coalitions symmetrically and show that higher trust tightens incentive constraints since it facilitates the formation of deviating coalitions. As a consequence, although trust facilitates the initial formation of coalitions, the extent of risk sharing in successfully formed coalitions is declining in the extent of trust and efficient allocations might feature resource burning or utility burning: trust is indeed a double-edged sword.
Employing the art-collection records of Burton and Emily Hall Tremaine, we consider whether early-stage art investors can be understood as venture capitalists. Because the Tremaines bought artists’ work very close to an artwork’s creation, with 69% of works in our study purchased within one year of the year when they were made, their collecting practice can best be framed as venture-capital investment in art. The Tremaines also illustrate art collecting as social-impact investment, owing to their combined strategy of art sales and museum donations for which the collectors received a tax credit under US rules. Because the Tremaines’ museum donations took place at a time that U.S. marginal tax rates from 70% to 91%, the near “donation parity” with markets, creating a parallel to ESG investment in the management of multiple forms of value.
Venture capital (VC) funds backed by large multi-fund families tend to perform substantially better due to cross-fund cash flows (CFCFs), a liquidity support mechanism provided by matching distributions and capital calls within a VC fund family. The dynamics of this mechanism coincide with the sensitivity of different stage projects owing to market liquidity conditions. We find that the early-stage funds demand relatively more intra-family CFCFs than later-stage funds during liquidity stress periods. We show that the liquidity improvement based on the timing of CFCF allocation reflects how fund families arrange internal liquidity provision and explains a large part of their outperformance.
Lack of privacy due to surveillance of personal data, which is becoming ubiquitous around the world, induces persistent conformity to the norms prevalent under the surveillance regime. We document this channel in a unique laboratory---the widespread surveillance of private citizens in East Germany. Exploiting localized variation in the intensity of surveillance before the fall of the Berlin Wall, we show that, at the present day, individuals who lived in high-surveillance counties are more likely to recall they were spied upon, display more conformist beliefs about society and individual interactions, and are hesitant about institutional and social change. Social conformity is accompanied by conformist economic choices: individuals in high-surveillance counties save more and are less likely to take out credit, consistent with norms of frugality. The lack of differences in risk aversion and binding financial constraints by exposure to surveillance helps to support a beliefs channel.
Supranational supervision
(2022)
We exploit the establishment of a supranational supervisor in Europe (the Single Supervisory Mechanism) to learn how the organizational design of supervisory institutions impacts the enforcement of financial regulation. Banks under supranational supervision are required to increase regulatory capital for exposures to the same firm compared to banks under the local supervisor. Local supervisors provide preferential treatment to larger institutes. The central supervisor removes such biases, which results in an overall standardized behavior. While the central supervisor treats banks more equally, we document a loss in information in banks’ risk models associated with central supervision. The tighter supervision of larger banks results in a shift of particularly risky lending activities to smaller banks. We document lower sales and employment for firms receiving most of their funding from banks that receive a tighter supervisory treatment. Overall, the central supervisor treats banks more equally but has less information about them than the local supervisor.
Resolving financial distress where property rights are not clearly defined: the case of China
(2022)
We use data on financially distressed Chinese companies in order to study a debt market where property rights are crudely defined and poorly enforced. To help with identification we use an event where a business-friendly province published new guidelines regarding the administration and enforcement of assets pledged as collateral. Although by no means a comprehensive reform of bankruptcy law or property rights, by instructing courts to enforce existing, albeit rudimentary, contractual rights the new guidelines virtually eliminated creditors runs and produced a sharp increase in the survival rate of financially-distressed companies. These changes illustrate how piecemeal reforms of property rights and their enforcement may have a significant impact on economic outcomes. Our analysis and results challenge the view that a fully fledged system of private property is a precondition for economic development.
This study examines the recent literature on the expectations, beliefs and perceptions of investors who incorporate Environmental, Social, Governance (ESG) considerations in investment decisions with the aim to generate superior performance and also make a societal impact. Through the lens of equilibrium models of agents with heterogeneous tastes for ESG investments, green assets are expected to generate lower returns in the long run than their non- ESG counterparts. However, at the short run, ESG investment can outperform non-ESG investment through various channels. Empirically, results of ESG outperformance are mixed. We find consensus in the literature that some investors have ESG preference and that their actions can generate positive social impact. The shift towards more sustainable policies in firms is motivated by the increased market values and the lower cost of capital of green firms driven by investors’ choices.