This study examines the short-term stock price reactions of green and brown stocks following Donald Trump’s victory in the 2024 U.S. Presidential election. Using an event-study methodology, we analyze Cumulative Abnormal Returns (CARs) for portfolios constructed based on environmental sustainability criteria, as ESG-based scores, and CO 2 emission intensity metrics. Our findings indicate that classification criteria significantly influence market reactions. Brown portfolios (low ESG scores) generally outperformed green portfolios (high ESG scores) post-election, reflecting investor expectations of relaxed environmental regulations favoring carbon-intensive industries. Conversely, when portfolios are classified by CO 2 emission intensity, green portfolios (low CO 2 emissions) outperformed brown portfolios (high CO 2 emissions), suggesting investors prioritize direct environmental impact metrics in the short term. The study also emphasizes the importance of the factor model used to estimate theoretical returns, as different approaches yield varying magnitudes and dynamics of CARs. Specifically, size and value factors are found to play a critical role in shaping the CARs of green and brown portfolios around the election. An additional regression analysis reveals that market volatility, public attention to climate change, and political sentiment (particularly rising attention to Trump) significantly influenced the CARs of green and brown portfolios, albeit with differing effects. Green sentiment, however, had no significant impact on CARs. These results highlight the complex interplay between political events, investor sentiment, and sustainability-related market dynamics. • We examine the 2024 election’s effect on green and brown stock portfolios. • Trump’s victory triggered outperformance of brown over green assets. • ESG-related metrics diverge from carbon intensity in capturing market response. • Political sentiment, uncertainty, and green awareness shape abnormal re- turns.
Comincioli et al. (Fri,) studied this question.