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

44 Pages Posted: 2 Dec 2019 Last revised: 22 Oct 2020

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

Using a sample of 2516 U.S. mutual funds over the period 2010-2017, 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. In the univariate analysis, the SAS results align with more socially responsible funds outperforming less socially responsible funds, while STE provides mixed evidence. The multivariate analysis shows, for both SAS and STE, that more socially responsible funds outperform their less socially responsible peers. Our results are consistent with the hypothesis that SRI does not 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 or http://dx.doi.org/10.2139/ssrn.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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