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Do socially responsible investment indexes outperform conventional indexes?

Author

Listed:
  • Shunsuke Managi
  • Tatsuyoshi Okimoto
  • Akimi Matsuda

Abstract

The question of whether more Socially Responsible (SR) firms outperform or underperform other conventional firms has been debated in the economic literature. In this study, using the Socially Responsible Investment (SRI) indexes and conventional stock indexes in the US, the UK and Japan, first and second moments of firm performance distributions are estimated based on the Markov Switching (MS) model. We find two distinct regimes (bear and bull) in the SRI markets as well as the stock markets for all the three countries. These regimes occur with the same timing in both types of market. No statistical difference in means and volatilities generated from the SRI indexes and conventional indexes in either region was found. Furthermore, we find strong comovements between the two indexes in both the regimes.

Suggested Citation

  • Shunsuke Managi & Tatsuyoshi Okimoto & Akimi Matsuda, 2012. "Do socially responsible investment indexes outperform conventional indexes?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1511-1527, September.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:18:p:1511-1527
    DOI: 10.1080/09603107.2012.665593
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    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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