Ethical Investing in Australia: Is There a Financial Penalty?

33 Pages Posted: 4 Aug 2004

See all articles by Rob Bauer

Rob Bauer

Maastricht University

Rogér Otten

Maastricht University - Limburg Institute of Financial Economics (LIFE)

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: March 15, 2004

Abstract

This study provides new evidence on the performance and investment style of retail ethical funds in Australia. By applying a conditional multi-factor Carhart (1997) model, we solve the benchmark problem most prior ethical studies suffered from. After controlling for investment style, time-variation in betas, bond exposure and home bias, we observe no evidence of significant differences in risk-adjusted returns between ethical and conventional funds during the 1992-2003 period. This result however is sensitive to the chosen time period. During 1992-1996, domestic ethical funds under-perform their conventional counterparts significantly. During 1996-2003, the ethical funds match the performance of conventional funds more closely. This suggests there is a learning effect for the relatively young ethical investment industry.

Keywords: Mutual funds, performance evaluation, style analysis, ethical investments

JEL Classification: G12, G20, G23

Suggested Citation

Bauer, Rob and Otten, Rogér and Tourani-Rad, Alireza, Ethical Investing in Australia: Is There a Financial Penalty? (March 15, 2004). EFA 2004 Maastricht Meetings Paper No. 1224; EFMA 2004 Basel Meetings Paper. Available at SSRN: https://ssrn.com/abstract=567127 or http://dx.doi.org/10.2139/ssrn.567127

Rob Bauer (Contact Author)

Maastricht University ( email )

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

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

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

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