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On the superior performance of SRI funds

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  • Fatemi, Ali
  • Fooladi, Iraj
  • Zhao, Yonggan
  • Ma, Zongming

Abstract

We compare the performance of 1126 US mutual funds deemed socially responsible to that of a matching sample of conventional funds over the three-decade period January 1980–December 2019. The comparisons are made over the entire period as well as the descending (bear) and ascending (bull) market subperiods, classified either according to the NBER method or the regime switching model. Our results indicate that SRI funds outperform their peers over the entire sample period. Additionally, regardless of the method used to the identify market condition or the asset pricing model employed, SRI funds as a group significantly outperform their conventional counterparts during bull markets but insignificantly so during bear markets. However, all-equity SRI funds and those that includes Equity and Fixed Income funds, significantly outperform their peers under either regime, with both methods and for all asset pricing specifications. Further examination indicates that the main driver of differences in the performance of SRI funds and their conventional peers can be attributed to their superior selection ability.

Suggested Citation

  • Fatemi, Ali & Fooladi, Iraj & Zhao, Yonggan & Ma, Zongming, 2024. "On the superior performance of SRI funds," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 567-581.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pa:p:567-581
    DOI: 10.1016/j.iref.2024.03.059
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    More about this item

    Keywords

    Mutual funds; Socially responsible investing; Performance evaluation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other

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