Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets |
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Authors: | Janick Christian Mollet Andreas Ziegler |
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Institution: | 1. Center for Corporate Responsibility and Sustainability (CCRS), University of Zurich, Switzerland;2. Center of Economic Research (CER), ETH Zurich, Switzerland;3. University of Kassel, Germany |
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Abstract: | This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998. |
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Keywords: | Socially responsible investing (SRI) Stock performance Portfolio analysis Asset pricing models Risk factors G11 G12 Q56 M14 |
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