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Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets
Author(s) -
Mollet Janick Christian,
Ziegler Andreas
Publication year - 2014
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2014.08.003
Subject(s) - stock (firearms) , financial economics , stock market , socially responsible investing , portfolio , economics , growth stock , stock market bubble , common stock , empirical evidence , business , monetary economics , finance , corporate governance , geography , archaeology , philosophy , context (archaeology) , epistemology
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.