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Does socially responsible mutual fund performance vary over the business cycle? New insights on the role of ethical strategy focus and green industry idiosyncratic risk

Author

Listed:
  • Juan Carlos Matallín-Sáez

    (Department of Finance & Accounting, Universitat Jaume I, Castellón, Spain)

  • Amparo Soler-Domínguez

    (Department of Finance & Accounting, Universitat Jaume I, Castellón, Spain)

  • Emili Tortosa-Ausina

    (IVIE, Valencia and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

This paper analyses the performance of US social responsible (SR) mutual funds in relation to the fund’s ethical strategy focus and whether the business cycle is in a state of expansion or recession. Our results show that in aggregated terms the abnormal performance of SR funds is negative and there are no significant differences based on their ethical strategy focus: environmental, ESG, religious and undefined. In general we also find no significant differences in performance according the state of the business cycle. In terms of methodology our analysis shows the relevance of considering a benchmark to cover idiosyncratic risks linked to the asset classes in which the fund invests according to its ethical commitments. This effect is especially relevant in the case of environmental funds due to the poor performance of the renewable energy industry since the 2008 financial crisis as a result of changes in green government policy and lower oil prices. Thus, part of the mutual fund performance will not be linked to managers but rather to the behaviour of these asset classes.

Suggested Citation

  • Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2016. "Does socially responsible mutual fund performance vary over the business cycle? New insights on the role of ethical strategy focus and green industry idiosyncratic risk," Working Papers 2016/03, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2016/03
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    References listed on IDEAS

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    More about this item

    Keywords

    Mutual fund; performance; business cycle; environmental; ESG; SRI;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • 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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