Fund Performance and Social Responsibility: New Evidence using Social Active Share and Social Tracking Error
42 Pages Posted: 2 Dec 2019
Date Written: September 7, 2019
We examine the effects of socially responsible investing (SRI) on mutual fund performance. We use two proxies of deviation from SRI: social active share (SAS) and social tracking error (STE) which, respectively, capture the differences in holdings and returns between a fund and a socially responsible index, namely the MSCI KLD 400. Using a sample of 2516 U.S. mutual funds over the period 2010-2017, our univariate analysis shows that less socially responsible funds do not outperform more socially responsible funds. The multivariate analysis shows, however, some evidence that more socially responsible funds display higher risk-adjusted performance than their less socially responsible peers. Our results are consistent with the hypothesis that SRI does not significantly damage fund performance.
Keywords: Mutual fund performance; Socially responsible investing; Active share
JEL Classification: G11, G14, G23
Suggested Citation: Suggested Citation