The Cost of Socially Responsible Portfolios: Testing for Mean-Variance Spanning

28 Pages Posted: 23 Jan 2008 Last revised: 16 Feb 2009

See all articles by Rients Galema

Rients Galema

Utrecht University - School of Economics

Bert Scholtens

University of Groningen - Department of Finance & Accounting

Auke Plantinga

University of Groningen

Date Written: February 1, 2009

Abstract

Investors are no worse off by excluding assets from their portfolio that are not socially responsible in case they face a short sales restriction. In fact, this conclusion will hold for most investor types. However, in case short sales are allowed for, investors are worse off in terms of foregone risk reduction opportunities for most dimensions of social responsibility. We use data for more than 2,000 US based companies for the period 1991-2004. We use mean-variance spanning tests to investigate whether investors are worse off in meterms by excluding assets from their portfolio that are not socially responsible.

Keywords: Mean-variance spanning, Portfolio Choice, Corporate Social Responsibility, Socially Responsible Investment, Short Sales Constraint

JEL Classification: G11, G12, M14

Suggested Citation

Galema, Rients and Scholtens, Bert and Plantinga, Auke, The Cost of Socially Responsible Portfolios: Testing for Mean-Variance Spanning (February 1, 2009). Available at SSRN: https://ssrn.com/abstract=1086560 or http://dx.doi.org/10.2139/ssrn.1086560

Rients Galema (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Bert Scholtens

University of Groningen - Department of Finance & Accounting ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Auke Plantinga

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen
Netherlands
+31 50 363 3685 (Phone)

HOME PAGE: http://www.aukeplantinga.com

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