Equity Investments: Research Sources; Investment Theory: Efficient Market Theory; Portfolio Management: Equity Strategies

Posted: 9 Aug 2009

See all articles by Meir Statman

Meir Statman

Santa Clara University - Department of Finance

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS); Acadian Asset Management LLC

CFA Institute

CFA Institute

Date Written: August 5, 2009

Abstract

Typical socially responsible investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics and shun stocks of companies associated with tobacco, alcohol, gambling, firearms, and military or nuclear operations. Analyzing 1992-2007 returns of stocks rated on social responsibility, this study found that this tilt gave such investors an advantage over conventional investors. The study also found that shunning resulted in a disadvantage for such investors relative to conventional investors. The advantage from tilting toward stocks of companies with high social responsibility scores is largely offset by the disadvantage from the exclusion of stocks of shunned companies. Socially responsible investors can thus do both well and good by adopting the best-in-class method in constructing their portfolios: tilting toward stocks of companies with high scores on social responsibility characteristics but refraining from shunning stocks of any company.

Keywords: Equity Investments, Other; Investment Theory, CAPM, APT, and Other Pricing Theories, Portfolio Management, Equity Strategies

Suggested Citation

Statman, Meir and Glushkov, Denys and Institute, CFA, Equity Investments: Research Sources; Investment Theory: Efficient Market Theory; Portfolio Management: Equity Strategies (August 5, 2009). Financial Analysts Journal, Vol. 65, No. 4, 2009. Available at SSRN: https://ssrn.com/abstract=1444355

Meir Statman

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS) ( email )

WRDS, St. Leonard's Court
3819 Chestnut St, suite 300
Philadelphia, PA 19104
United States
2158986705 (Phone)

HOME PAGE: http://ssrn.com/author=664253

Acadian Asset Management LLC ( email )

260 Franklin Street
Boston, MA 02110
United States

CFA Institute (Contact Author)

CFA Institute ( email )

PAPER REQUESTS:
915 E. High Street
Charlottesville, VA 22902
United States
434-951-5261 (Phone)
434-951-5370 (Fax)

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