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Ethical strategy focus and mutual fund management: performance and persistence

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, Universidad Jaume I, Castellón, Spain)

Abstract

Over the last few years academics and practitioners alike have been analyzing the relative performance of different types of mutual funds, with a particular emphasis on comparing the performance of conventional versus socially responsible investment (SRI). The methods and samples used, as well as the results obtained are diverse, but they generally point to the difficulties found by SRI to yield an equivalent performance as that of its conventional peers—given the investment constraints they face. In this study we focus on the comparative performance of a sample of SRI funds, which we decompose mainly into Environmental, Social and Governance (ESG), environmental, and religious, and which invest in three different geographical areas. For these funds we measure not only performance but, more importantly, their persistence—i.e., whether the best (worst) funds are past winners (losers) as well. This twofold objective turns out to be essential to uncover some trends in the industry. Specifically, whereas ESG, in general, outperform their environmental peers, a deeper scrutiny focusing also on performance persistence reveals that this claim should be tempered, since investing in the best past environmental funds yields superior performance than investing in the best past ESG funds. This result, which holds for the two main geographical regions analyzed (Europe and US/Canada), would indicate that the comparison between these two types of funds is more intricate than what we might a priori expect, being particularly relevant to factor in the comparison an evaluation of performance persistence.

Suggested Citation

  • Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2016. "Ethical strategy focus and mutual fund management: performance and persistence," Working Papers 2016/01, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2016/01
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    References listed on IDEAS

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    1. Deimante Teresiene & Daiva Budriene, 2021. "Business ethics and ethical investing: from historical, ethical approach to real investments," Technium Social Sciences Journal, Technium Science, vol. 17(1), pages 212-221, March.

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    More about this item

    Keywords

    environmental; ESG; mutual fund; performance; persistence; SRI;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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