International Evidence on Ethical Mutual Fund Performance and Investment Style

30 Pages Posted: 11 Nov 2002

See all articles by Rob Bauer

Rob Bauer

Maastricht University; European Centre for Corporate Engagement (ECCE)

Kees C. G. Koedijk

Tilburg University - Department of Finance

Rogér Otten

Maastricht University - Limburg Institute of Financial Economics (LIFE); ABP Pensionfund

Multiple version iconThere are 3 versions of this paper

Date Written: July 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: Ethical mutual funds, investment style

JEL Classification: G12, G20, G23

Suggested Citation

Bauer, Rob and Koedijk, Kees G. and Otten, Rogér, International Evidence on Ethical Mutual Fund Performance and Investment Style (July 2002). Available at SSRN: https://ssrn.com/abstract=325702

Rob Bauer (Contact Author)

Maastricht University ( email )

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

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

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)

Rogér Otten

Maastricht University - Limburg Institute of Financial Economics (LIFE) ( 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

ABP Pensionfund

Amsterdam
Netherlands

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