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Performance and Resilience of Socially Responsible Investing (SRI) and Conventional Funds during Different Shocks in 2016: Evidence from Japan

Author

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  • Saiful Arefeen

    (Graduate School of Economics, Ritsumeikan University, 1-1-1, Nojihigashi, Kusatsu, Shiga 525-8577, Japan)

  • Koji Shimada

    (Graduate School of Economics, Ritsumeikan University, 1-1-1, Nojihigashi, Kusatsu, Shiga 525-8577, Japan)

Abstract

Socially responsible investing (SRI) reap the benefits of a social consensus and is often presented as a solution to conciliate finance and sustainable development. This article investigates the performance and resilience of both socially responsible and conventional funds listed in the Japan Investment Trust Association (JITA) during two economic shocks (the U.S. election and Brexit) in 2016. To see the immediate reaction in fund performance around different shocks, an event study with market model using ordinary least square (OLS), an event study with market model using exponential generalized autoregressive heteroscedasticity (EGARCH) and an event study with Fama–French multi-factor model was used to avoid common features of return data such as non-normality, heteroscedasticity, and cross-correlation. This study found that the recent U.S. election had a significant positive effect whereas the Brexit referendum event had a significant negative shock on fund returns in Japan around the event window. It is evident from the empirical findings that, compared to conventional funds, socially responsible funds were more resilient to uncertainty around the recent U.S. presidential election whereas conventional funds were more sensitive during the Brexit referendum. The important implications of these findings are the optimal strategies of institutional or individual investors who have direct or indirect exposure to the fund volatility risk in Japan.

Suggested Citation

  • Saiful Arefeen & Koji Shimada, 2020. "Performance and Resilience of Socially Responsible Investing (SRI) and Conventional Funds during Different Shocks in 2016: Evidence from Japan," Sustainability, MDPI, vol. 12(2), pages 1-20, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:2:p:540-:d:307507
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    2. Lars Hornuf & Gül Yüksel, 2022. "The Performance of Socially Responsible Investments: A Meta-Analysis," CESifo Working Paper Series 9724, CESifo.
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    8. Omura, Akihiro & Roca, Eduardo & Nakai, Miwa, 2021. "Does responsible investing pay during economic downturns: Evidence from the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 42(C).

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