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Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds
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Renneboog, Luc, Ter Horst, Jenke and Zhang, Chendi. (2011) Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds. Journal of Financial Intermediation, Vol.20 (No.4). pp. 562-588. ISSN 10429573
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Official URL: http://dx.doi.org/10.1016/j.jfi.2010.12.003
Abstract
We study the money flows into and out of socially responsible investment (SRI) funds around the world. In their investment decisions, investors in SRI funds may be more concerned with ethical or social issues than with fund performance. Therefore. SRI money flows are less related to past fund returns. Ethical money is less sensitive to past negative returns than are conventional fund flows, especially when SRI funds primarily use negative or Sin/Ethical screens. Social attributes of SRI funds weaken the relation between money inflows and past positive returns. However, money flows into funds with environmental screens are more sensitive to past positive returns than are conventional fund flows. Stock picking based on in-house SRI research increases the money flows. These results give evidence on the role of nonfinancial attributes, which induce heterogeneity of investor clienteles within SRI funds. We find no evidence of a smart money effect, as the funds that receive more inflows neither outperform nor underperform their benchmarks or conventional funds.
| Item Type: | Journal Article |
|---|---|
| Subjects: | H Social Sciences > HG Finance |
| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
| Library of Congress Subject Headings (LCSH): | Investments -- Moral and ethical aspects, Social responsibility of business, Mutual funds |
| Journal or Publication Title: | Journal of Financial Intermediation |
| Publisher: | Academic Press |
| ISSN: | 10429573 |
| Date: | 2011 |
| Volume: | Vol.20 |
| Number: | No.4 |
| Number of Pages: | 27 |
| Page Range: | pp. 562-588 |
| Identification Number: | 10.1016/j.jfi.2010.12.003 |
| Status: | Peer Reviewed |
| Publication Status: | Published |
| Access rights to Published version: | Restricted or Subscription Access |
| URI: | http://wrap.warwick.ac.uk/id/eprint/38364 |
Data sourced from Thomson Reuters' Web of Knowledge
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