International Evidence on Ethical Mutual Fund Performance and Investment Style
Kees C. G. Koedijk
Tilburg University - Department of Finance
Maastricht University - Department of Finance; Philips Pension Fund
CEPR Discussion Paper No. 3452
Using an international database containing 103 German, UK and US ethical mutual funds, we review and extend previous research on ethical mutual fund performance. By applying a multi-factor Carhart (1997) model we solve the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find little evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period. Introducing time variation in betas however leads to a significant under-performance of domestic US funds and a significant out-performance of UK ethical funds, relative to their conventional peers. Finally, we differentiate previous results by documenting a learning effect. After a period of strong under-performance, older ethical funds finally are catching up, while younger funds continue to under-perform both the index and conventional peers.
Number of Pages in PDF File: 30
Keywords: Ethical mutual funds, investment style
JEL Classification: G12, G20, G23working papers series
Date posted: November 11, 2002
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