Analyzing Sustainable Investor Returns

33 Pages Posted: 13 Dec 2024 Last revised: 19 May 2025

See all articles by Jean-Paul van Brakel

Jean-Paul van Brakel

Erasmus University Rotterdam (EUR) - Finance; Robeco Institutional Asset Management

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Georgi Kyosev

Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM); Robeco Institutional Asset Management

Date Written: November 05, 2024

Abstract

We investigate why investors in sustainable mutual funds earn higher dollar-weighted returns than other investors, despite the lower buy-and-hold returns of these funds. Using U.S. equity mutual fund data, we show that conventional investors exhibit poor timing behavior, while sustainable investors do not. We find that this difference is driven by sustainable investors responding more strongly to positive returns without overreacting to negative returns. Moreover, we show that non-sustainable funds with similar characteristics also exhibit higher dollar-weighted returns. This suggests that skilled investors self-select into funds with attributes correlated with sustainability. Our findings highlight the importance of investor behavior in evaluating investment results.

Keywords: sustainable investing, investor timing, flows, mutual funds, active management

JEL Classification: G11, G23, G41, Q56, M14

Suggested Citation

van Brakel, Jean-Paul and Huij, Joop and Kyosev, Georgi, Analyzing Sustainable Investor Returns (November 05, 2024). Available at SSRN: https://ssrn.com/abstract=5010664 or http://dx.doi.org/10.2139/ssrn.5010664

Jean-Paul Van Brakel (Contact Author)

Erasmus University Rotterdam (EUR) - Finance ( email )

Burgemeester Oudlaan 50
Rotterdam, 3062PA
Netherlands

Robeco Institutional Asset Management

Weena 850
Rotterdam, 3014 DA
Netherlands

Joop Huij

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

HOME PAGE: http://www.robeco.com/

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

Georgi Kyosev

Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Robeco Institutional Asset Management ( email )

Rotterdam, 3011 AG
Netherlands

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