The Ethical Mutual Fund Performance Debate: New Evidence from Canada

By Rob Bauer, Jeroen Derwall, R. Otten. 2007

425 citations recorded by the source corpus.

Although the academic interest in ethical mutual fund performance has developed steadily, the evidence to date is mainly sample-specific. To tackle this critique, new research should extend to unexplored countries. Using this as a motivation, we examine the performance and risk sensitivities of Canadian ethical mutual funds vis-à-vis their conventional peers. In order to overcome the methodological deficiencies most prior papers suffered from, we use performance measurement approaches in the spirit of Carhart (1997, Journal of Finance 52(1): 57–82) and Ferson and Schadt (1996, Journal of Finance 51(2): 425–461). In doing so, we investigate the aggregated performance and investment style of ethical and conventional mutual funds and allow for time variation in the funds’ systematic risk. Our␣Canadian evidence supports the conjecture that any␣performance differential between ethical mutual funds and their conventional peers is statistically insignificant.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/03aee24753b6c354d158693b0cb43aae78a26d7f

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Citations in the corpus

Ethical requirement and financial interest: a literature review on socially responsible investing (2015, methodology): “Bello (2005) uses a matching approach, and shows that between 1994 and 2001 ethical funds did not underperform or outperform conventional funds regarding the effect of assets held, portfolio diversification, and variable effects of diversification on investment performance.”
A Bibliometric and Visualization Analysis of Socially Responsible Funds (2019, background): “[45] for Canadian funds; • Renneboog et al.”
On the comparative performance of socially responsible and Islamic mutual funds (2014, background): “However, it has also been argued that imposing ethical constraints on equity investment can adversely affect portfolio performance (Bauer et al., 2007).”
A tale of values-driven and profit-seeking social investors (2011, background): “…recent and comprehensive studies on SRI mutual funds.10 The majority of these and earlier studies conclude that SRI and conventional mutual funds produce similar-risk adjusted returns (e.g., Bauer, Derwall, and Otten (2007), Bauer, Otten, and Tourani-Rad (2006), and Gregory and Whittaker (2007)).”
Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms (2013, methodology): “In order to test the robustness of our estimation results, the corrected z-statistic of Boehmer et al. (1991) can be used.”
Does It Pay to Be Green? A Systematic Overview (2008, background): “Some authors, such as Blacconiere and Patten (1994), Jones et al.”
Green and Good? The Investment Performance of US Environmental Mutual Funds (2011, background): “(1997), Bauer et al. (2007) and Fernandez and Matallin (2008).”
Australian Socially Responsible Funds: Performance, Risk and Screening Intensity (2011, result): “These results are in line with Bauer et al. (2006). Of particular interest are the as from the difference portfolios (columns 4, 6, 9 and 11).”
Crisis and Corporate Social Responsibility: Threat or Opportunity? (2009, background): “Ingram and Frazier, 1983 Environmental performance has a negative effect on financial statements Negative Freeman, 1984 CSR minimizes transaction costs and potential conflicts with stakeholders Positive Soloman and Hansen, 1985 CSR costs are clearly covered with benefits in employee morale and produ”