Article ID Journal Published Year Pages File Type
5069338 Finance Research Letters 2016 11 Pages PDF
Abstract

Previous research on the relationship between societal and financial performance has yielded ambiguous results. This letter seeks to put forth an explanation for this puzzle. We argue that the difference in returns between ethical and conventional indices may, in fact, be insignificant due to the 'mainstreaming' of ethical investment. Using a database of 24 international indices over the 2008-2014 time periods, we calculate rolling daily returns, develop a robust test for difference in Sharpe ratios, and compare alfas across EGARCH asset pricing models with endogenous volatility breakpoints. Results converge to indicate no significant difference in financial performance between conventional and ethical indices. This validates the 'mainstreaming' hypothesis and opens avenues for future research.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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