Fund Performance and Social Responsibility: New Evidence using Social Active Share and Social Tracking Error

42 Pages Posted: 2 Dec 2019

See all articles by Sadok El Ghoul

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Aymen Karoui

York University

Date Written: September 7, 2019

Abstract

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

El Ghoul, Sadok and Karoui, Aymen, Fund Performance and Social Responsibility: New Evidence using Social Active Share and Social Tracking Error (September 7, 2019). Available at SSRN: https://ssrn.com/abstract=3489201

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Aymen Karoui

York University ( email )

2275, avenue Bayview
Toronto, Ontario M4N 3M6
Canada

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