Ethical mutual funds catch up with conventional funds
January 28, 2008
The study “International Evidence on Ethical Mutual Fund Performance and Investment Style” (2002) does, however, show a “learning effect”. After a period of strong under-performance, older ethical funds catch up with conventional funds. The more recently launched ones continue to under-perform both the index and conventional peers for a period of time [an asset size variable would have been informative here].
The authors also note that screened social indexes “are less powerful in explaining fund performance compared to standard, non-ethical indexes.”
This paper won the 2002 Moskowitz Prize competition, awarded by the Social Investment Forum. The Moskowitz Prize, which in 2004 became an initiative of the Center for Responsible Business at the University of California, Berkeley, promotes the concept, practice, and growth of socially responsible investing.
This article was previously published on stristudies.org, January 28, 2008.
Professor of Financial Management, Tilburg University and Dean of TiSEM
Rob Bauer is Professor of Finance, Maastricht University
Administrative Editor FSinsight