Socially responsible investing (SRI) mutual funds and market crises : an empirical analysis of the risk-adjusted performance of SRI funds relative to conventional funds during market crises
Master thesis
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https://hdl.handle.net/11250/2679485Utgivelsesdato
2020Metadata
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- Master Thesis [4379]
Sammendrag
The master thesis aims to investigate the risk-adjusted performance of socially responsible
investing (SRI) funds relative to conventional funds. We study the performance in different
market states from March 2003 to March 2020, where we distinguish between crisis and noncrisis periods. The master thesis contributes with new insight by including the economic
disruptions caused by the coronavirus pandemic in 2020. In our analysis, we use a matching
procedure where each SRI fund is matched with three conventional funds based on specified
criteria. We apply multi-factor models with dummy variables to distinguish between the
respective funds and market states. Besides, we include interaction terms to account for
variations in the risk factors. We study the performance of U.S. SRI equity mutual funds
compared to U.S. conventional equity mutual funds through Jensen’s alpha. We find that SRI
funds tend to outperform their conventional fund peers during the crisis period, but the result
is not significant. Further, the result reveals that conventional funds contribute to a negative
risk-adjusted return and are more exposed to market fluctuations during the crisis period. To
test the robustness of the results, we analyze the funds using different SRI strategies and divide
the period into two different sub-periods. The result show that the performance of SRI funds
has improved over the years and tend to follow their conventional peers to a greater extent.
We conclude that investing in SRI funds makes one neither better off, nor worse off.