Does it pay to be ethical? Evidence from the FTSE4Good
Article
Belghitar, Y., Clark, E. and Deshmukh, N. 2014. Does it pay to be ethical? Evidence from the FTSE4Good. Journal of Banking and Finance. 47, pp. 54-62. https://doi.org/10.1016/j.jbankfin.2014.06.027
Type | Article |
---|---|
Title | Does it pay to be ethical? Evidence from the FTSE4Good |
Authors | Belghitar, Y., Clark, E. and Deshmukh, N. |
Abstract | The empirical mean-variance evidence comparing the performance of socially responsible investments (SRI) and conventional investments suggests that there is no significant difference between the two. This paper re-examines the problem in the context of Marginal Conditional Stochastic Dominance (MCSD), which can accommodate any return distribution or concave utility function. Our results provide strong evidence that there is a financial price to be paid for socially responsible investing. Indices composed of socially responsible firms are MCSD dominated by trademarked indices composed of conventional firms as well as by indices carefully matched by size and industry with the firms in the SRI indices. Zero cost portfolios created by shorting the SRI index and using the proceeds to invest in the conventional index generate higher average returns, lower variance and higher skewness than either of the two indices standing alone. They also MCSD dominate the SRI and conventional indices standing alone. |
Keywords | Socially Responsible Investments, SRI, Marginal Conditional Stochastic Dominance. |
Publisher | Elsevier |
Journal | Journal of Banking and Finance |
ISSN | 0378-4266 |
Publication dates | |
Online | 08 Jul 2014 |
01 Oct 2014 | |
Publication process dates | |
Deposited | 28 Apr 2015 |
Accepted | 29 Jun 2014 |
Output status | Published |
Publisher's version | |
Accepted author manuscript | License |
Copyright Statement | Under a Creative Commons license |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.jbankfin.2014.06.027 |
Language | English |
https://repository.mdx.ac.uk/item/85224
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