RT Journal Article
SR Electronic
T1 Corporate Social Responsibility Exposure and Performance of Mutual Funds
JF The Journal of Investing
FD Institutional Investor Journals
SP 53
OP 65
DO 10.3905/joi.2019.28.2.053
VO 28
IS 2
A1 Xi Dong
A1 Shu Feng
A1 Sitikantha Parida
A1 Zhihong Wang
YR 2019
UL https://pm-research.com/content/28/2/53.abstract
AB The authors study the performance consequences of exposure to corporate social responsibility (CSR) through stock holdings for mutual funds. Using a large sample of US domestic mutual funds, they find that funds overweighting low-CSR stocks outperform funds underweighting them by 1.7% to 2.6% annually. This outperformance, however, reverses during the 2008-2009 financial crisis. They also find similar performance patterns among stocks. An equal-weighted high-minus-low CSR stock return spread can explain the CSR-based fund performance spread, whereas a value-weighted spread cannot. These results are consistent with the interpretation that low-CSR funds overweight low-CSR small-cap stocks that offer high returns to investors who are averse to low-CSR investments. Investors tend to avoid low-CSR stocks due to either social norms against these stocks or risk of underperformance of these investments when overall trust in corporations suffers a negative shock (such as during a financial crisis).TOPICS: ESG investing, portfolio theory, portfolio construction