Socially Responsible Investing

Abstract

The author tests two value strategies on the Domini Social Index (DSI) as Compustat return data. He finds that a rebalancing strategy of ranking DSI stocks by valuation each quarter yields an 18.9% average annualized return versus an average of 16.7% for three value benchmarks for the time period fourth quarter 1990 through first quarter 1999. The DSI Shaper ratio was 0.99 versus a benchmark average of 0.93. A buy-and-hold strategy has good nominal returns (17.5%), but a below-benchmark Sharpe ratio of 0.85.