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The stocks at stake: Return and risk in socially responsible investment

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  • Galema, Rients
  • Plantinga, Auke
  • Scholtens, Bert

Abstract

We relate US portfolio returns, book-to-market values and excess stock returns to different dimensions of socially responsible performance. We find that socially responsible investing (SRI) impacts on stock returns by lowering the book-to-market ratio and not by generating positive alphas. Our result is consistent with the theoretical work suggesting that SRI is reflected in demand differences between SRI and non-SRI stock. It also explains why so few studies are able to establish a link between alpha's and SRI.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jbfina:v:32:y:2008:i:12:p:2646-2654
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