Australian Socially Responsible Funds: Performance, Risk and Screening Intensity
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We investigate the performance and risk of Socially Responsible Investment (SRI) equity funds in the Australian market and find no significant difference between the returns of SRI and conventional funds. In an extension to prior literature, we examine the impact of the number of positive, negative and total screens funds impose on performance and risk. We find little evidence of positive or negative screening impacting total return, but find weak evidence that funds with more screens overall provide better risk-adjusted performance. Positive screening significantly reduces funds’ risk. However, negative screening significantly increases risk and reduces funds’ abilities to form diversified portfolios.
KeywordsSocially Responsible Investment SRI funds mutual funds Australia
Australian Graduate School of Management Centre for Research in Finance
The mimicking book-to-market portfolio
Responsible Investment Association Australasia
The mimicking size portfolio
Socially Responsible Investment
Total net asset
The mimicking momentum factor
Number of positive screens employed by an SRI mutual fund
Number of negative screens employed by an SRI mutual fund
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The authors thank Jessica Jouning and Wei-Lun Lee for their capable research assistance, and Karen Benson and Tom Smith for their helpful comments. The authors also gratefully acknowledge the financial support extended by the Accounting and Finance Association of Australia and New Zealand for.
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