Do Socially Responsible Investment Indexes Outperform Conventional Indexes?

Managi, Shunsuke and Okimoto, Tatsuyoshi and Matsuda, Akimi (2012): Do Socially Responsible Investment Indexes Outperform Conventional Indexes?

Abstract

The question of whether more socially responsible (SR) firms outperform or underperform other conventional firms has been debated in the economic literature. In this study, using the socially responsible investment (SRI) indexes and conventional stock indexes in the US, the UK, and Japan, first and second moments of firm performance distributions are estimated based on the Markov switching model. We find two distinct regimes (bear and bull) in the SRI markets as well as the stock markets for all three countries. These regimes occur with the same timing in both types of market. No statistical difference in means and volatilities generated from the SRI indexes and conventional indexes in either region was found. Furthermore, we find strong comovements between the two indexes in both regimes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Socially responsible investments; Markov switching model; Maximum likelihood estimations; Return and volatilities; Bear and bull market
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q00 - General; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

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