The Cost of Being Good

30 Pages Posted: 3 Jan 2007

See all articles by Anne M. Anderson

Anne M. Anderson

Middle Tennessee State

David Hobson Myers

Northeastern University; Lehigh University

Date Written: January 3, 2007

Abstract

This paper examines the performance of U.S. equities through the use of socially responsible investment screens. We extend the socially responsible investing literature by examining a broader study of social screens. We examine the returns and risk-adjusted returns to investing in socially responsible investment portfolios using twenty social screens from KLD. The approach introduces a simple model of asset returns based on a utility function that incorporates social goals. We also extend the socially responsible investment (SRI) research by examining the persistence in performance of SRI screens using Jensen's alpha and conditional alphas. We find that there is no cost to being good by investing according to SRI screens. Investors are no worse off investing in accordance with their social beliefs.

Keywords: Performance, socially responsible investment, conditional asset pricing

JEL Classification: G11,G12

Suggested Citation

Anderson, Anne M. and Myers, David Hobson and Myers, David Hobson, The Cost of Being Good (January 3, 2007). Available at SSRN: https://ssrn.com/abstract=954703 or http://dx.doi.org/10.2139/ssrn.954703

Anne M. Anderson

Middle Tennessee State ( email )

TN
United States

David Hobson Myers (Contact Author)

Northeastern University ( email )

220 B RP
Boston, MA 02115
United States

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

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