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Prof. Lubos Pastor: Equilibrium Models vs. Intuition (EP.124)

The Rational Reminder Podcast

CHAPTER

Sustainable Investing, Green Assets, and Expected Returns

The chapter explores the relationship between sustainable investing and expected returns, focusing on a model that demonstrates how investor preferences for green stocks can lead to lower expected returns due to excess demand. It challenges the idea that green firms will always outperform brown firms by suggesting that market expectations may already be priced in. The discussion also touches on the social impact and personal satisfaction associated with choosing lower expected returns for positive environmental impact in green investing.

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