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Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets

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  • Mollet, Janick Christian
  • Ziegler, Andreas

Abstract

This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998.

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  • Mollet, Janick Christian & Ziegler, Andreas, 2014. "Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets," Review of Financial Economics, Elsevier, vol. 23(4), pages 208-216.
    • Handle: RePEc:eee:revfin:v:23:y:2014:i:4:p:208-216
    DOI: 10.1016/j.rfe.2014.08.003
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    9. Iulia LUPU & Gheorghe HURDUZEU & Mariana NICOLAE, 2016. "Connections Between Sentiment Indices And Reduced Volatilities Of Sustainability Stock Market Indices," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(1), pages 157-174.
    10. Tao Bing & Meng Li, 2019. "Does CSR Signal the Firm Value? Evidence from China," Sustainability, MDPI, vol. 11(15), pages 1-22, August.
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    More about this item

    Keywords

    Socially responsible investing (SRI); Stock performance; Portfolio analysis; Asset pricing models; Risk factors;
    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
    • 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
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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