Abstract

http://ssrn.com/abstract=1746564
 


 



Does Religion Affect Stock Markets and Institutional Investor Behavior?


Joshua Golombik


University of New South Wales (UNSW) - School of Banking and Finance

Alok Kumar


University of Miami - School of Business Administration

Jerry T. Parwada


University of New South Wales (UNSW) - School of Banking and Finance; UNSW Business School; Financial Research Network (FIRN)

January 24, 2011


Abstract:     
Socially responsible (SR) investing based on religious beliefs is experiencing robust growth. While the prior literature has related investment behavior to investors’ religious backgrounds, whether a religious authority’s stock preferences affect equity markets is far less understood. In this paper we study the relevance of a well known religiously motivated stock index, the MSCI US Catholic Values Index (CV400), which is based on opinions of the Catholic Church, to stock market activity and to mutual fund manager behavior. We examine the price and comovement effects of additions and deletions to the index and hypothesize that fund managers located in predominantly Catholic regions (1) show preferences for CV400 stocks relative to the rest of the market and (2) actively trade on changes to the index. We find that generally, CV400 index changes have no impact on constituent stocks’ prices and comovement with their index peers. Catholic managers tilt more towards CV400 stocks than Protestant managers. However, Catholic managers only actively trade in reaction to index changes instigated by a religious authority in a similar manor as they trade in stocks with corresponding financial characteristics. Taken together, our results suggest that institutional investors value the SR attribute of a stock only if the asset would have been chosen on its financial merits alone.

Number of Pages in PDF File: 66

Keywords: Religion, SRI, Invesments, Fund Managers

JEL Classification: G23

working papers series


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Date posted: January 25, 2011  

Suggested Citation

Golombik, Joshua and Kumar, Alok and Parwada, Jerry T., Does Religion Affect Stock Markets and Institutional Investor Behavior? (January 24, 2011). Available at SSRN: http://ssrn.com/abstract=1746564 or http://dx.doi.org/10.2139/ssrn.1746564

Contact Information

Joshua Golombik
University of New South Wales (UNSW) - School of Banking and Finance ( email )
Sydney, NSW 2052
Australia
Alok Kumar
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
Jerry T. Parwada (Contact Author)
University of New South Wales (UNSW) - School of Banking and Finance ( email )
Sydney, NSW 2052
Australia

UNSW Business School ( email )
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)
UNSW
Sydney, NSW 2052
Australia
HOME PAGE: http://www.firn.org.au

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