 The effect of socially responsible investing on portfolio performanceAlexander Kempf and Peer Osthoff No 06-10, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR) Abstract: More and more investors apply socially responsible screens when building their stock portfolios. This raises the question whether these investors can increase their performance by incorporating such screens into their investment process. To answer this question we implement a simple trading strategy based on socially responsible ratings from the KLD Research & Analytics: Buy stocks with high socially responsible ratings and sell stocks with low socially responsible ratings. We find that this strategy leads to high abnormal returns of up to 8.7% per year. The maximum abnormal returns are reached when investors employ the best-in-class screening approach, use a combination of several socially responsible screens at the same time, and restrict themselves to stocks with extreme socially responsible ratings. The abnormal returns remain significant even after taking into account reasonable transaction costs. Keywords: Socially Responsible Investing; Portfolio Management; Trading Strategy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:0610 Access Statistics for this paper More papers in CFR Working Papers from University of Cologne, Centre for Financial Research (CFR) Contact information at EDIRC. |
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