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A volatility-match approach to measure performance: the case of socially responsible exchange traded funds (ETFs)

Author

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  • Manuel Lobato
  • Javier Rodríguez
  • Herminio Romero

Abstract

Purpose - This study examines the risk-adjusted performance of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs. Design/methodology/approach - The main empirical result is based on a risk-adjusted performance metric that does not rely on a linear framework. It measures the difference between the returns of an ETF and the returns of a volatility-match and efficient portfolio. In addition, performance is measured using alpha based on single and multifactor formulations. Findings - Results show that the performance of SRI ETFs is not different from the performance of conventional ETFs. Originality/value - Given the results of the study, socially aware investors can choose to invest in SRI ETFs without sacrificing performance.

Suggested Citation

  • Manuel Lobato & Javier Rodríguez & Herminio Romero, 2021. "A volatility-match approach to measure performance: the case of socially responsible exchange traded funds (ETFs)," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 22(1), pages 34-43, May.
    • Handle: RePEc:eme:jrfpps:jrf-04-2020-0066
    DOI: 10.1108/JRF-04-2020-0066
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    Cited by:

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    2. Mirza, Nawazish & Afzal, Ayesha & Umar, Muhammad & Skare, Marinko, 2023. "The impact of green lending on banking performance: Evidence from SME credit portfolios in the BRIC," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 843-850.
    3. Liu, Kaiyuan & Afzal, Ayesha & Zhong, Yifan & Hasnaoui, Amir & Yue, Xiao-Guang, 2023. "Investigating the resource curse: Evidence from MENA and N-11 countries," Resources Policy, Elsevier, vol. 80(C).
    4. Marszk, Adam & Lechman, Ewa, 2024. "What drives sustainable investing? Adoption determinants of sustainable investing exchange-traded funds in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 63-82.
    5. Feng, Jie & Gao, Junhong, 2023. "Natural resource curse hypothesis and governance: Understanding the role of rule of law and political risk in the context of China," Resources Policy, Elsevier, vol. 85(PB).
    6. Chang, Lei & Shi, Fanglan & Taghizadeh-Hesary, Farhad & Saydaliev, Hayot Berk, 2023. "Information and communication technologies development and the resource curse," Resources Policy, Elsevier, vol. 80(C).
    7. Sadiq, Muhammad & Paramaiah, Ch & joseph, Robinson & Dong, Ziguang & Nawaz, Muhammad Atif & Shukurullaevich, Nizomjon Khajimuratov, 2024. "Role of fintech, green finance, and natural resource rents in sustainable climate change in China. Mediating role of environmental regulations and government interventions in the pre-post COVID eras," Resources Policy, Elsevier, vol. 88(C).
    8. Dai, Zhifeng & Luo, Zhuang & Liu, Chang, 2023. "Dynamic volatility spillovers and investment strategies between crude oil, new energy, and resource related sectors," Resources Policy, Elsevier, vol. 83(C).
    9. Hasan F. Baklaci & William I-Wei Cheng & Jianing Zhang, 2024. "Performance Attributes of Environmental, Social, and Governance Exchange-Traded Funds," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(2), pages 307-334, June.
    10. Ding, Yuanyi, 2023. "Does natural resources cause sustainable financial development or resources curse? Evidence from group of seven economies," Resources Policy, Elsevier, vol. 81(C).
    11. Junchao Zhang & Wei Han, 2022. "Carbon emission trading and equity markets in China: How liquidity is impacting carbon returns?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 6466-6478, December.
    12. Anastasia O. Volodina & Marina B. Trachenko, 2023. "ESG Investment Profitability in Developed and Emerging Markets with Regard to the Time Horizon," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 59-73, April.
    13. Lisha, Liu & Mousa, Saeed & Arnone, Gioia & Muda, Iskandar & Huerta-Soto, Rosario & Shiming, Zhai, 2023. "Natural resources, green innovation, fintech, and sustainability: A fresh insight from BRICS," Resources Policy, Elsevier, vol. 80(C).
    14. Zeng, Hongjun & Abedin, Mohammad Zoynul & Zhou, Xiangjing & Lu, Ran, 2024. "Measuring the extreme linkages and time-frequency co-movements among artificial intelligence and clean energy indices," International Review of Financial Analysis, Elsevier, vol. 92(C).
    15. Ji, Xiangfeng & Song, Tianyu & Umar, Muhammad & Safi, Adnan, 2023. "How China is mitigating resource curse through infrastructural development?," Resources Policy, Elsevier, vol. 82(C).
    16. Wang, Xiang & Yin, Jian & Yang, Yao & Muda, Iskandar & Abduvaxitovna, Shamansurova Zilola & AlWadi, Belal Mahmoud & Castillo-Picon, Jorge & Abdul-Samad, Zulkiflee, 2023. "Relationship between the resource curse, Forest management and sustainable development and the importance of R&D Projects," Resources Policy, Elsevier, vol. 85(PA).
    17. Zheng, ShiYong & Liu, Hua & Hafeez, Muhammad & Wang, Xiaofeng & Fahad, Shah & Yue, Xiao-Guang, 2023. "Testing the resource curse hypothesis: The dynamic roles of institutional quality, inflation and growth for Dragon," Resources Policy, Elsevier, vol. 85(PA).
    18. Chen, Fei-fei & Wang, Qiu-Su & Umar, Muhammad & Zheng, Liya, 2023. "Towards sustainable resource management: The role of governance, natural resource rent and energy productivity," Resources Policy, Elsevier, vol. 85(PA).
    19. Li, Zheng-Zheng & Li, Yameng & Huang, Chia-Yun & Peculea, Adelina Dumitrescu, 2023. "Volatility spillover across Chinese carbon markets: Evidence from quantile connectedness method," Energy Economics, Elsevier, vol. 119(C).
    20. Chen, Zhonglu & Umar, Muhammad & Su, Chi-Wei & Mirza, Nawazish, 2023. "Renewable energy, credit portfolios and intermediation spread: Evidence from the banking sector in BRICS," Renewable Energy, Elsevier, vol. 208(C), pages 561-566.
    21. Li, Zhuolun, 2023. "Do geopolitical risk, green finance, and the rule of law affect the sustainable environment in China? Findings from the BARDL approach," Resources Policy, Elsevier, vol. 81(C).

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