An Experimental Study on Motivations for Socially Responsible Investment
This paper aims, through laboratory-based economic experiments, to shed light on the decision-making process in SRI and how it differs from decision making by other types of investors. We asked subjects to make decisions regarding stock investments on the basis of the three attributes of return, variance, and CSR, and we estimated their utility function to classify the types of investors. We also conducted a dictator game and lottery-choice experiments to measure subjectsf heterogeneity in regard to three psychological factors: altruism, risk aversion, and time preference. We used psychological factors to apply a latent class model and we examined whether these factors affect investment in the stock of companies that actively promote CSR. The main finding of this study is that there is heterogeneity among investors, even among SRI investors. With the latent class model, we found conventional investors, SRI investors, and risk-loving SRI investors among our subjects. We hypothesised three psychological factors behind this heterogeneity. While the results support our altruistic hypothesis, the results under the risk-averse hypothesis and lower time preference hypothesis depend on which investor group is treated as SRI investors and also on the model specification. Although previous studies also found heterogeneity among SRI investors, no studies have tried to reveal the psychological background of the heterogeneity.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.kobe-u.ac.jp|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
- Bauer, Rob & Koedijk, Kees & Otten, Roger, 2005. "International evidence on ethical mutual fund performance and investment style," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1751-1767, July.
- Anderhub, Vital & Gneezy, Uri & Güth, Werner & Sonsino, Doron, 1999.
"On the interaction of risk and time preferences: An experimental study,"
SFB 373 Discussion Papers
1999,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Vital Anderhub & Werner Güth & Uri Gneezy & Doron Sonsino, 2001. "On the Interaction of Risk and Time Preferences: An Experimental Study," German Economic Review, Verein für Socialpolitik, vol. 2(3), pages 239-253, 08.
- Galema, Rients & Plantinga, Auke & Scholtens, Bert, 2008. "The stocks at stake: Return and risk in socially responsible investment," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2646-2654, December.
- Riccardo Scarpa & Mara Thiene, 2005. "Destination Choice Models for Rock Climbing in the Northeastern Alps: A Latent-Class Approach Based on Intensity of Preferences," Land Economics, University of Wisconsin Press, vol. 81(3).
- Benson, Karen L. & Humphrey, Jacquelyn E., 2008. "Socially responsible investment funds: Investor reaction to current and past returns," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1850-1859, September.
- Miwa Nakai & Keiko Yamaguchi & Kenji Takeuchi, 2011. "Are SRI Funds More Resilient towards the Global Financial Crisis?," Discussion Papers 1018, Graduate School of Economics, Kobe University.
- Bauer, Rob & Otten, Roger & Rad, Alireza Tourani, 2006. "Ethical investing in Australia: Is there a financial penalty?," Pacific-Basin Finance Journal, Elsevier, vol. 14(1), pages 33-48, January.
- Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, 05.
- Bollen, Nicolas P. B., 2007. "Mutual Fund Attributes and Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(03), pages 683-708, September.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
- Joan C. Junkus & Thomas C. Berry, 2010. "The demographic profile of socially responsible investors," Managerial Finance, Emerald Group Publishing, vol. 36(6), pages 474-481, June.
- Peter Boxall & Wiktor Adamowicz, 2002. "Understanding Heterogeneous Preferences in Random Utility Models: A Latent Class Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(4), pages 421-446, December.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
- Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
- Francisco Climent & Pilar Soriano, 2011. "Green and Good? The Investment Performance of US Environmental Mutual Funds," Journal of Business Ethics, Springer, vol. 103(2), pages 275-287, October.
- Jonas Nilsson, 2008. "Investment with a Conscience: Examining the Impact of Pro-Social Attitudes and Perceived Financial Performance on Socially Responsible Investment Behavior," Journal of Business Ethics, Springer, vol. 83(2), pages 307-325, December.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- N. Kreander & R.H. Gray & D.M. Power & C.D. Sinclair, 2005. "Evaluating the Performance of Ethical and Non-ethical Funds: A Matched Pair Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1465-1493.
- Javier Gil-Bazo & Pablo Ruiz-Verdú & André Santos, 2010.
"The Performance of Socially Responsible Mutual Funds: The Role of Fees and Management Companies,"
Journal of Business Ethics,
Springer, vol. 94(2), pages 243-263, June.
- Javier Gil-Bazo & Pablo Ruiz-Verdu & Andre A. P. Santos, 2008. "The performance of socially responsible mutual funds: the role of fees and management companies," Business Economics Working Papers wb083409, Universidad Carlos III, Departamento de Economía de la Empresa.
- Stephen Hynes & Nick Hanley & Riccardo Scarpa, 2008. "Effects on Welfare Measures of Alternative Means of Accounting for Preference Heterogeneity in Recreational Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 1011-1027.
- Alan Gregory & John Matatko & Robert Luther, 1997. "Ethical Unit Trust Financial Performance: Small Company Effects and Fund Size Effects," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(5), pages 705-725.
- Winnett, Adrian & Lewis, Alan, 2000. "''You'd have to be green to invest in this'': Popular economic models, financial journalism, and ethical investment," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 319-339, June.
- Walter O. Simmons & Rosemarie Emanuele, 2007. "Male-female giving differentials: are women more altruistic?," Journal of Economic Studies, Emerald Group Publishing, vol. 34(6), pages 534-550, November.
- Andreas Ziegler & Michael Schröder & Klaus Rennings, 2007.
"The effect of environmental and social performance on the stock performance of european corporations,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 37(4), pages 661-680, August.
- Andreas Ziegler & Michael Schröder & Klaus Rennings, 2008. "The Effect of Environmental and Social Performance on the Stock Performance of European Corporations," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(4), pages 609-609, August.
- Rob Bauer & Jeroen Derwall & RogÃ©r Otten, 2007. "The Ethical Mutual Fund Performance Debate: New Evidence from Canada," Journal of Business Ethics, Springer, vol. 70(2), pages 111-124, January.
- Andreas Ziegler, 2009.
"Is it Beneficial to be Included in a Sustainability Stock Index? A Panel Data Study for European Firms,"
CER-ETH Economics working paper series
09/121, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Andreas Ziegler, 2012. "Is it Beneficial to be Included in a Sustainability Stock Index? A Panel Data Study for European Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(3), pages 301-325, July.
- Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer, vol. 2(2), pages 107-127, December.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
When requesting a correction, please mention this item's handle: RePEc:koe:wpaper:1314. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Econ Kobe SysAdmin)
If references are entirely missing, you can add them using this form.