I think your update on divestment is in fact wrong; divestment has no or negligible effect.
There are two main cases:
1- Divestment without substantial coordination
This stands in for anything where you are divesting from a company you find distasteful, but with the expectation that there will not be substantial numbers of other people who follow the same logic. In this case, unless you control a large fund, your effect on the price will be nonzero, and downward, but negligible.
2 - Divestment with coordination.
(This covers both explicit coordination and amorphous implicit coordination like ‘many people share my moral logic and this offense was made very public’.)
Assume for the moment that a mass movement to divest is not substantial evidence of the corporation’s fundamentals being weaker. (This is often false, particularly for businesses which sell directly to consumers.) If so, the price will go down, but high-information observers (serious traders) will note the outside factor depressing prices, note that this outside factor is uncorrelated with future stock performance, and conclude that these stocks are now a substantially better deal than other stocks. Result: stocks bought up until the market price ~returns to the equilibrium price without divestment. (This is a longstanding phenomenon in the form of the ‘sin fund’. There are mixed results on whether the P/E ratio is actually better for ‘sin stocks’ in a durable way, but they’re not worse.)
If the company is actually likely to be negatively impacted on a non-stock level, the situation is more complicated, but not much better for the divestors. To the extent the skilled traders correctly estimate A, the size of the divestment movement, and B, the (size of the effect on the company’s bottom line)/(size of divestment movement) quotient, the stock price will behave exactly as it would if the divestors had made some equally-costly signal of their opposition to the company but not actually divested. These estimates will be imperfect, but they seem likely to be a case where the EMH works well, and if they have errors don’t seem likely to be systematically wrong in a particular direction.
Note also that if you want to lower the share price, the thing to do, given that competent traders will attempt to figure out the market price implied by the fundamentals and be fairly adequate in that task, is to maximize A⋅B; increasing the size is no good if the
‘heat/light’ ratio goes down by a bigger ratio than the size went up. If you consider a slightly more complicated model where you have movement size S, fraction of movement which divests D, and fraction of movement which takes direct actions that hurt the company’s fundamentals F, A=DS and B=FD, for a total effect of A⋅B=F⋅S, divestment totally falling out of the picture. Any movement only has a finite amount of energy to spend convincing its members to take actions, so we should further expect F and D to be anticorrelated, i.e. it’s not worth actively discouraging people from divestment but whenever there is a choice you should always choose the other action if it has a meaningful chance of hurting the company’s fundamentals, possibly even down to dust-speck-level negligible-but-nonzero effects.
I think your update on divestment is in fact wrong; divestment has no or negligible effect.
There are two main cases:
1- Divestment without substantial coordination
This stands in for anything where you are divesting from a company you find distasteful, but with the expectation that there will not be substantial numbers of other people who follow the same logic. In this case, unless you control a large fund, your effect on the price will be nonzero, and downward, but negligible.
2 - Divestment with coordination.
(This covers both explicit coordination and amorphous implicit coordination like ‘many people share my moral logic and this offense was made very public’.)
Assume for the moment that a mass movement to divest is not substantial evidence of the corporation’s fundamentals being weaker. (This is often false, particularly for businesses which sell directly to consumers.) If so, the price will go down, but high-information observers (serious traders) will note the outside factor depressing prices, note that this outside factor is uncorrelated with future stock performance, and conclude that these stocks are now a substantially better deal than other stocks. Result: stocks bought up until the market price ~returns to the equilibrium price without divestment. (This is a longstanding phenomenon in the form of the ‘sin fund’. There are mixed results on whether the P/E ratio is actually better for ‘sin stocks’ in a durable way, but they’re not worse.)
If the company is actually likely to be negatively impacted on a non-stock level, the situation is more complicated, but not much better for the divestors. To the extent the skilled traders correctly estimate A, the size of the divestment movement, and B, the (size of the effect on the company’s bottom line)/(size of divestment movement) quotient, the stock price will behave exactly as it would if the divestors had made some equally-costly signal of their opposition to the company but not actually divested. These estimates will be imperfect, but they seem likely to be a case where the EMH works well, and if they have errors don’t seem likely to be systematically wrong in a particular direction.
Note also that if you want to lower the share price, the thing to do, given that competent traders will attempt to figure out the market price implied by the fundamentals and be fairly adequate in that task, is to maximize A⋅B; increasing the size is no good if the ‘heat/light’ ratio goes down by a bigger ratio than the size went up. If you consider a slightly more complicated model where you have movement size S, fraction of movement which divests D, and fraction of movement which takes direct actions that hurt the company’s fundamentals F, A=DS and B=FD, for a total effect of A⋅B=F⋅S, divestment totally falling out of the picture. Any movement only has a finite amount of energy to spend convincing its members to take actions, so we should further expect F and D to be anticorrelated, i.e. it’s not worth actively discouraging people from divestment but whenever there is a choice you should always choose the other action if it has a meaningful chance of hurting the company’s fundamentals, possibly even down to dust-speck-level negligible-but-nonzero effects.