International Evidence on Ethical Mutual Fund Performance and Investment Style

LIFE Working Paper No. 02.59

28 Pages Posted: 22 Jan 2002  

Rogér Otten

Maastricht University - Department of Finance; Philips Pension Fund

Rob Bauer

Maastricht University

Kees C. G. Koedijk

Tilburg University - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: March 7, 2002

Abstract

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.

Keywords: Mutual Funds, Performance evaluation, Style Analysis, Ethical Investments,

JEL Classification: G12, G20, G23

Suggested Citation

Otten, Rogér and Bauer, Rob and Koedijk, Kees C. G., International Evidence on Ethical Mutual Fund Performance and Investment Style (March 7, 2002). LIFE Working Paper No. 02.59. Available at SSRN: https://ssrn.com/abstract=297882 or http://dx.doi.org/10.2139/ssrn.297882

Rogér Otten (Contact Author)

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3838 (Phone)
+31 43 388 4875 (Fax)

HOME PAGE: http://www.fdewb.unimaas.nl/finance/faculty/Otten

Philips Pension Fund

Eindhoven
Netherlands

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

Kees G. Koedijk

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)

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