International Evidence on Ethical Mutual Fund Performance and Investment Style

Posted: 10 Jan 2006

See all articles by Rob Bauer

Rob Bauer

Maastricht University

Kees C. G. Koedijk

Tilburg University - Department of Finance

Rogér Otten

Maastricht University - Limburg Institute of Financial Economics (LIFE)

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Abstract

Using an international database containing 103 German, UK and US ethical mutual funds we review and extend previous research on ethical mutual fund performance. By applying a multi-factor Carhart (1997) model we overcome the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find no evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period. Our results also suggest that ethical mutual funds underwent a catching up phase, before delivering financial returns similar to those of conventional mutual funds. Finally, our performance estimates are robust to the inclusion of ethical indexes, which, surprisingly, are not incrementally capable of explaining ethical mutual fund return variation.

Keywords: Mutual Funds, Performance evaluation, Style Analysis, Ethical Investments

JEL Classification: G12, G20, G23

Suggested Citation

Bauer, Rob and Koedijk, Kees G. and Otten, Rogér, International Evidence on Ethical Mutual Fund Performance and Investment Style. Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=873601

Rob Bauer (Contact Author)

Maastricht University ( email )

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

Kees G. Koedijk

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)

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

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