Being Greedy, Doing Good - The New Economics
March 12, 2021
Latest News

February 25, 2021   

NN Investment Partners published research showing predictive value in our sovereign bond media sentiment scores.

February 17, 2021   

Our new ESG data feed launches on February 17, 2021! It is market-leading in innovation, breadth, and granularity.

Latest Press

February 22, 2021   Robots on Wall Street Wrestle With Confusing World of Reddit  Justina Lee, Bloomberg


February 17, 2021   Refinitiv rolls out MarketPsych ESG Analytics  Refinitiv, Finextra

As a young investor in the late 1990's the conventional wisdom was that "sin stocks" (gambling, alcohol, and weapons stocks) outperformed others. Investors could choose to either be greedy and profit or be principled and underperform. The narrative fit the transactional "greed is good" nature of the times. But it turns out the story isn't so simple.

Inflation spotting, meme stocks (see our Jan newsletter), cryptocurrencies, and the green transformation – lots happening in markets. Today we focus on the latter.

With a our new ESG dataset, we see that the performance of ESG investments is more often the opposite of the conventional wisdom - invesors can both do good AND outperform.


In 2019 MarketPsych had an all-company meeting in Bali. We made good memories but also experienced the dark side of paradise – pre-pandemic Bali was overrun with tourists (yes, us too!) and the infrastructure didn’t hold up. Internet fails frequently, roads are clogged, and the beaches are covered in plastic garbage after rainstorms. A vlogger captured this drone shot at Canggu beach, Bali after a storm.

At our Bali meeting we started repurposing our natural language processing (NLP) engines to focus on ESG, so we (and others) could study how environmental management, social values, and government weakness hurt development. A picture of a team discussion in Bali, below.

For example, we saw Danone single-use cups littering ravines and floating in ocean plastic shoals. The Indonesian government was not effectively managing waste, and Danone was making it worse. As investors, we wondered if there would be any blowback for Danone or Bali longer-term.


At the Bali meeting we outlined a new software architecture. We already used natural language processing (NLP) to scan thousands of news and social media outlets in real-time in a dozen languages (including Indonesian!). And we adapted this software for ESG applications.

Below is a simple depiction of our three-stage process digitizing key themes in media text – in this case trust in the management team of Luckin Coffee – converted into a ManagementTrust score.

We create hundreds of scores like PollutionControversy for 30,000 companies and GovernmentTrust for 252 countries and territories. As we test the data, we see many of the findings align with recent behavioral economics research.


For example, recent Oxford University research found that happier employees are more productive – that is, happy call center employees sell 13% more than their unhappy peers. Happy workers are more productive ( & "Does Employee Happiness have an Impact on Productivity? (SSRN)"

Our Workplace Sentiment score quantifies news and social media mentions of happy (vs unhappy) working environments. We ranked S&P 500 companies on their monthly score, and we plotted the next month stock price returns of the top and bottom 5% of companies.  The return os a portfolio of companies with positive office sentiment is plotted in the green line, and the returns of the most unhappy workplaces is depicted in the red line.

Month-after-month, companies with happier employees outperform while companies with unhappy employees underperform.


Not all of our results are so consistent – we decided to investigate “climate sin stocks”. We tracked a basket of the top 10% of companies in the S&P 500 associated with Sustainability Controversy in the media since 2006. We used a monthly rotation model.

Note that these unsustainable companies outperformed the remaining 90% of the S&P 500 from 2006 until the oil price collapse in 2014. Since then Unsustainable companies have been significantly underperforming while Sustainable companies have been outperforming.


The media perceives Tesla as a sustainable company, but portrayals of Musk's management style are often negative. Below we can see how the views of Musk plummeted when news of him smoking marijuana and drinking whiskey on the Joe Rogan podcast was released. The red dotted line is the minutely share price of Tesla (TSLA) and the blue line is a 60-minute moving average of the media sentiment about Tesla’s management team (including CEO Musk).

That said, one (or a few) management mistakes does not a bad stock make. While Tesla is an exception, when we tested the S&P 500 stocks on their management sentiment scores, we saw that over time companies associated with higher management sentiment generally outperform those with lower.


There are many factors affecting share prices, and the three we showed above - workplace happiness, sustainability, & management sentiment - are only three.

We also see some anti-ESG factors suggesting positive returns, and we'll report on those as well if they appear robust. For example, we initially saw that our score "DeceptiveAdvertising" was associated with higher stock returns for the S&P 500, but on further examination we found top tech companies were the primary inclusions, and there is no broadly stable predictive relationship there.

We’ve been looking through our data, and in coming months we’ll share new insights around the evolution of the economy. Most of our positive ESG results are replicable at yearly horizons, across countries, and with larger stock universes.

We're part of a free webinar "Building Quant Strategies with ESG Data" on Wednesday March 17th at 9:30am ET / 14:30 CET by NorQuant in case you’d like to learn more!

Semoga Sukses! (Best wishes!)
The MarketPsych Team



Bellet, Clement and De Neve, Jan-Emmanuel and Ward, George, Does Employee Happiness have an Impact on Productivity? (October 14, 2019). Saïd Business School WP 2019-13, Available at SSRN:   |   [email protected]   |   +1 (323) 389-1813
Copyright © MarketPsych 2021 , All rights reserved.
DISCLAIMER Your use of this the content contained in this publication is at your own risk. Opinions expressed by MarketPsych, LLC ("MarketPsych") are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. MarketPsych does not receive compensation of any kind from any companies that may be mentioned in MarketPsych. Any opinions expressed are subject to change without notice. MarketPsych is not responsible for errors or omissions, or responsible to keep any information up to date or to correct any past information. Any recommendations contained in this material are for educational and information purposes only and should not be construed as a solicitation to enter into an investment advisory relationship or to purchase any security or other financial instrument. MarketPsych does not provide customized or personally tailored advice or recommendations through this publication. Advice and trading signals displayed contained in this material are of a generic nature and are not tailored to the specific circumstances of any visitor or subscriber. You should use any information gathered from this publication only as a starting point for your own independent research and decision making process. Any specific investment recommendations or advice contained or referred to in this material may not be suitable for all investors. You should carefully consider whether any specific recommendation is suitable for you in light of your financial condition. You are advised to conduct your own due diligence and seek advice of a qualified professional when it comes to making investment decisions for your own account. The risk of loss in trading securities and other financial instruments can be substantial. No trading program can offer the potential for profit without a corresponding risk of loss. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor performance. You may sustain a total loss of you investment. Past performance is not necessarily indicative of future results. MarketPsych is not responsible for the success or failure of your investment decisions relating to information or services presented herein. MarketPsych reserves the right to refuse its services to anyone, either current subscriber or potential subscriber, with or without any reason or for no reason. MarketPsych reserves the right at any time to modify this disclaimer and risk disclosure without notice.