The Impact of Behavioral Biases on Investment Decisions in Green Stocks: An Analysis Based on ESG Fund Flows
El Mehdi DOUHABI, Zineb DRISSI
Abstract. The traditional financial theories hold a view on how individuals utilize their knowledge of markets to construct their portfolios. Evidence indicates, however, that investors are influenced by various psychological, social & other types of biases as well. This study focuses on the moderating effect of sustainability in investor behavior in both behavioral finance and investing practices by examining whether trading patterns within green ETFs & conventional ETFs (S&P 500) exhibit similar characteristics through applying an OLS regression model to evaluate recency (through lag returns) & herding influences (through squared returns). Results show that TAN exhibits a positive and significant recency and herding (β = 0.106, p < .001; β = 0.547, p < .001) effects, ICLN shows moderate herding (β = 0.388, p < 0.001), and ESGU displays no behavioral bias. The S&P 500 shows strong herding (β = 0.429, p < 0.001), but with a negative recency effect ((β = −0.186, p = 0.001), suggesting contrarian behavior. These findings indicate that behavioral biases persist in ESG markets, though their impact varies by fund type and investor profile.
Keywords
Behavioral Finance, ESG Investing, Green ETFs, Investor Behavior, Sustainable Finance
Published online 4/25/2026, 9 pages
Copyright © 2026 by the author(s)
Published under license by Materials Research Forum LLC., Millersville PA, USA
Citation: El Mehdi DOUHABI, Zineb DRISSI, The Impact of Behavioral Biases on Investment Decisions in Green Stocks: An Analysis Based on ESG Fund Flows, Materials Research Proceedings, Vol. 64, pp 1073-1081, 2026
DOI: https://doi.org/10.21741/9781644904091-133
The article was published as article 133 of the book Energy Futures
Content from this work may be used under the terms of the Creative Commons Attribution 3.0 license. Any further distribution of this work must maintain attribution to the author(s) and the title of the work, journal citation and DOI.
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