Ethical investments and financial performance: An international evidence

Wajahat Azmi; Shamsher Mohamad; Mohamed Eskandar Shah

doi:10.1016/j.pacfin.2019.05.005

Ethical investments and financial performance: An international evidence

Wajahat Azmi^*
, Shamsher Mohamad
, Mohamed Eskandar Shah

^*Corresponding author for this work

Lorong Universiti A

Research output: Contribution to journal › Article › peer-review

14 Citations (Scopus)

Abstract

This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack of diversification opportunities and poor managerial skills. The results are robust to various asset pricing models and macroeconomic factors.

Original language	English
Article number	101147
Journal	Pacific Basin Finance Journal
Volume	62
DOIs	https://doi.org/10.1016/j.pacfin.2019.05.005
Publication status	Published - Sept 2020
Externally published	Yes

Keywords

Ethical funds
Macroeconomic factors
Managerial skills
Performance evaluation
Shariah compliant funds
Socially responsible funds

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10.1016/j.pacfin.2019.05.005

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title = "Ethical investments and financial performance: An international evidence",

abstract = "This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack of diversification opportunities and poor managerial skills. The results are robust to various asset pricing models and macroeconomic factors.",

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T1 - Ethical investments and financial performance

T2 - An international evidence

AU - Azmi, Wajahat

AU - Mohamad, Shamsher

AU - Shah, Mohamed Eskandar

PY - 2020/9

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N2 - This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack of diversification opportunities and poor managerial skills. The results are robust to various asset pricing models and macroeconomic factors.

AB - This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack of diversification opportunities and poor managerial skills. The results are robust to various asset pricing models and macroeconomic factors.

KW - Ethical funds

KW - Macroeconomic factors

KW - Managerial skills

KW - Performance evaluation

KW - Shariah compliant funds

KW - Socially responsible funds

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DO - 10.1016/j.pacfin.2019.05.005

M3 - Article

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SN - 0927-538X

VL - 62

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

M1 - 101147

ER -

Ethical investments and financial performance: An international evidence

Abstract

Keywords

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