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Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets


Mollet, Janick Christian; Ziegler, Andreas (2014). Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets. Review of Financial Economics, 23(4):208-216.

Abstract

This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998.

This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Center for Corporate Responsibility and Sustainability
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2014
Deposited On:12 Nov 2014 16:47
Last Modified:05 Apr 2016 18:30
Publisher:Elsevier
ISSN:1058-3300
Publisher DOI:https://doi.org/10.1016/j.rfe.2014.08.003
Related URLs:http://www.ccrs.uzh.ch (Author)
Permanent URL: https://doi.org/10.5167/uzh-100678

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