Investors’ response to the Morningstar sustainability rating : empirical evidence from Scandinavian mutual funds
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- Master Thesis 
We examine the eﬀect of the introduction of the Morningstar Sustainability Rating in March 2016 on mutual fund ﬂows for Scandinavian funds. Making use of panel regressions and an event study, we ﬁnd strong evidence that retail investors shift their money away from funds with high sustainability ratings to funds with low sustainability ratings. A low-rated fund receives on average a net ﬂow per month 2.0 percentage points higher, and a high-rated fund suﬀers on average a net ﬂow per month 1.2 percentage points lower than an average-rated fund during the ﬁrst year after the launch of the rating. We ﬁnd similar results in our sub sample analyses on countries, fund sizes, and fund categories. In the event study, we ﬁnd that inﬂow is more sensitive to the launch of the rating than outﬂow, as investors respond immediately by investing in the low-rated funds, while investors exit high-rated funds with lags.