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Do socially responsible investment indexes outperform conventional indexes?

Author

Listed:
  • Shunsuke Managi
  • Tatsuyoshi Okimoto
  • Akimi Matsuda

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

Suggested Citation

  • Shunsuke Managi & Tatsuyoshi Okimoto & Akimi Matsuda, 2012. "Do socially responsible investment indexes outperform conventional indexes?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1511-1527, September.
  • Handle: RePEc:taf:apfiec:v:22:y:2012:i:18:p:1511-1527
    DOI: 10.1080/09603107.2012.665593
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    References listed on IDEAS

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    Cited by:

    1. repec:spr:envpol:v:19:y:2017:i:4:d:10.1007_s10018-016-0171-4 is not listed on IDEAS
    2. Graham McIntosh, 2016. "Socially Responsible Investment and Market Performance: The Case of Energy and Resource Firms," Cambridge Working Papers in Economics 1609, Faculty of Economics, University of Cambridge.
    3. Janusz Brzeszczyński & Graham McIntosh, 2014. "Performance of Portfolios Composed of British SRI Stocks," Journal of Business Ethics, Springer, vol. 120(3), pages 335-362, March.
    4. Y Ito & S Managi & A Matsuda, 2013. "Performances of socially responsible investment and environmentally friendly funds," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(11), pages 1583-1594, November.
    5. repec:ebl:ecbull:eb-17-00518 is not listed on IDEAS
    6. repec:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0155-4 is not listed on IDEAS
    7. Shunsuke Managi & Tatsuyoshi Okimoto & Akimi Matsuda, 2012. "Do socially responsible investment indexes outperform conventional indexes?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1511-1527, September.
    8. Hooi Hooi Lean & Duc Khuong Nguyen, 2014. "Policy uncertainty and performance characteristics of sustainable investments across regions around the global financial crisis," Applied Financial Economics, Taylor & Francis Journals, vol. 24(21), pages 1367-1373, November.
    9. María del Mar Miralles-Quirós & José Luis Miralles-Quirós, 2017. "Improving Diversification Opportunities for Socially Responsible Investors," Journal of Business Ethics, Springer, vol. 140(2), pages 339-351, January.
    10. Sadorsky, Perry, 2014. "Modeling volatility and conditional correlations between socially responsible investments, gold and oil," Economic Modelling, Elsevier, vol. 38(C), pages 609-618.

    More about this item

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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

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