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A tale of values-driven and profit-seeking social investors

  • Derwall, Jeroen
  • Koedijk, Kees
  • Ter Horst, Jenke

The segmentation of the socially responsible investing (SRI) movement with a values-versus-profit orientation solves the puzzling evidence that both socially responsible and controversial stocks produce superior returns. We derive that the segment of values-driven investors primarily uses "negative" screens to avoid controversial stocks, while the profit-driven segment uses "positive" screens. As the result of an empirical analysis over the period 1992-2008, we base our segmentation on investment screens that help us to examine whether values affect prices. We find that, although the profit-driven segment earns abnormal returns in the short run, these profit-generating opportunities do not persist in the long run for SRI stocks. However, our conclusions highlight the observation that different views on SRI can be complementary in the short run.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 8 (August)
Pages: 2137-2147

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:8:p:2137-2147
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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