The Performance of Socially Responsible Investments in Public Equity: Risk and Return of Ethical Funds and Stocks

Marco Ciancabilla & Lukas Maximilian Sauckel

Student thesis: Master thesis


Among the trends that constantly shape the behaviour of investors on the financial market, growing attention has been given to the duality of “doing well while doing good”. With an overall market estimated to be worth $22.89 trillion, social investments caught the attention of academics and investors, who had been looking closely to the financial performance of SRI (Socially Responsible Investing) strategies for many decades. Notwithstanding the vast literature that has been created – mainly through empirical studies – there is neither a definite position on whether social investments perform differently than conventional investments, nor on what might cause potential differences. Against this background, the thesis studies the performance of social stocks and funds and compares those to their non-social peers and to the market index, respectively. The analysis develops on two levels. On a firm level, social and non-social stocks are compared in terms of excess returns, through the Augmented Dickey-Fuller test, and Sharpe ratio, through a paired circular block bootstrap. On a fund level, the monthly returns of social funds are regressed over three different timeframes against the market index (identified in the MSCI world), and the presence of a positive or negative Jensen’s alpha is investigated. The results do not show a statistically significant difference between most social and non-social stocks in terms of both excess returns and Sharpe ratios – except for two groups of companies operating in North America where non-responsible stocks gained superior performances. Finally, no significant differences in performance between social funds and the market index are found, with the majority of the alphas not being statistically different from zero. Therefore, we conclude that investors do not need to discount financial performance when embracing SRI strategies.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2018
Number of pages158
SupervisorsFrancesco Di Lorenzo