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
Journal of Banking and Finance, Forthcoming
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 overcome the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find no evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period. Our results also suggest that ethical mutual funds underwent a catching up phase, before delivering financial returns similar to those of conventional mutual funds. Finally, our performance estimates are robust to the inclusion of ethical indexes, which, surprisingly, are not incrementally capable of explaining ethical mutual fund return variation.
Keywords: Mutual Funds, Performance evaluation, Style Analysis, Ethical Investments
JEL Classification: G12, G20, G23Accepted Paper Series
Date posted: January 10, 2006
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