The Price of Ethics and Stakeholder Governance: Evidence from Socially Responsible Mutual Funds
This paper estimates the price of ethics by studying the risk-return relation in socially responsible investment (SRI) funds. Consistent with investors paying a price for ethics, SRI funds in many European and Asia-Pacific countries strongly underperform both domestic benchmarks and conventional peers by about 5％ per annum, although UK and US SRI funds do not significantly underperform their benchmarks. The underperformance of SRI funds is not driven by loadings on an ethics style factor. There is mixed evidence of a smart money effect: SRI investors are unable to identify the funds that will outperform in the future, whereas they show some fund-selection ability in identifying ethical funds that will perform poorly. Furthermore, the screening activities of SRI funds have a significant impact on funds riskadjusted returns and loadings on risk factors. Interestingly, corporate governance and social screens yield lower risk-adjusted returns.
ethics mutual funds socially responsible investing investment screens smart money risk loadings
Luc Renneboog Jenke Ter Horst Chendi Zhang
Department of Finance and CentER,Tilburg University,P.O.Box 90153,5000 LE Tilburg,the Netherlands,an Department of Finance and CentER,Tilburg University,P.O.Box 90153,5000 LE Tilburg,the Netherlands Finance Group,Warwick Business School,University of Warwick,CV4 7AL Coventry,UK
国际会议
大连
英文
1-41
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）