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Do Socially Responsible Investment Indexes Outperform Conventional Indexes?

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  • Managi, Shunsuke
  • Okimoto, Tatsuyoshi
  • Matsuda, Akimi

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 model. We find two distinct regimes (bear and bull) in the SRI markets as well as the stock markets for all 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 regimes.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36662.

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Date of creation: 14 Feb 2012
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Handle: RePEc:pra:mprapa:36662

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Keywords: Socially responsible investments; Markov switching model; Maximum likelihood estimations; Return and volatilities; Bear and bull market;

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Cited by:
  1. Y Ito & S Managi & A Matsuda, 2013. "Performances of socially responsible investment and environmentally friendly funds," Journal of the Operational Research Society, Palgrave Macmillan, vol. 64(11), pages 1583-1594, November.
  2. Janusz Brzeszczynski & Graham McIntosh, 2012. "Performance of Portfolios Composed of British SRI Stocks," CFI Discussion Papers, Centre for Finance and Investment, Heriot Watt University 1204, Centre for Finance and Investment, Heriot Watt University.
  3. Janusz BrzeszczyƄski & Graham McIntosh, 2014. "Performance of Portfolios Composed of British SRI Stocks," Journal of Business Ethics, Springer, Springer, vol. 120(3), pages 335-362, March.
  4. Shunsuke Managi & Tatsuyoshi Okimoto & Akimi Matsuda, 2012. "Do socially responsible investment indexes outperform conventional indexes?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 22(18), pages 1511-1527, September.
  5. Hooi Hooi Lean & Duc Khuong Nguyen, 2014. "Policy uncertainty and performance characteristics of sustainable investments across regions around the global financial crisis," Working Papers, Department of Research, Ipag Business School 2014-295, Department of Research, Ipag Business School.
  6. Sadorsky, Perry, 2014. "Modeling volatility and conditional correlations between socially responsible investments, gold and oil," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 609-618.

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