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A reassessment of the European SRI Funds "underperformance": does the intensity of extra-financial negative screening matter?

  • Yves Jegourel

    ()

    (LAREFI, BEM Bordeaux Management School)

  • Samuel Maveyraud

    ()

    (GREThA)

Social responsible investment is surging in all industrial countries, despite the conventional wisdom that the inclusion of extra-financial criteria in the stock selection process should arm the financial performance of these funds. As a consequence, many papers have attempted to measure the financial performance of SRI funds and compared it to the performance of conventional funds with similar characteristics. According to this literature, we use a traditional CAPM model that allows for time-varying volatility to compare the risk-adjusted returns of several portfolios of SRI funds with differences in the intensity of extra-financial negative screening. Our key result shows that both alpha and beta are negatively correlated to the intensity of negative screenings. Thus, it appears that the risk-adjusted returns of SRI funds significantly differ from the returns of conventional funds if this latter criterion is taken into account.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I1-P84.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 1 ()
Pages: 913-923

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Handle: RePEc:ebl:ecbull:eb-09-00563
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