Do Socially Responsible Investment Funds Sell Losses and Ride Gains? The Disposition Effect in SRI Funds

Beatrice Boumda, Darren Duxbury, Cristina Ortiz and Luis Vicente
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Beatrice Boumda: Accounting and Finance Department, University of Zaragoza, 50005 Zaragoza, Spain
Cristina Ortiz: Accounting and Finance Department, IEDIS, University of Zaragoza, 50005 Zaragoza, Spain
Luis Vicente: Accounting and Finance Department, IEDIS, University of Zaragoza, 50005 Zaragoza, Spain

Sustainability, 2021, vol. 13, issue 15, 1-14

Abstract: An increasing percentage of the total net assets under professional management is devoted to ethical investments. Socially responsible investment (SRI) funds have a dual objective: building an investment strategy based on environmental, social, and corporate governance (ESG) screens and providing financial returns to investors. In the current study, we investigate whether this dual objective has an influence on the behavior of mutual fund managers in the realization of gains and losses. Evidence has shown that most investors in SRI funds invest in those funds primarily because of their social concerns. If the motivations of SRI managers align with those of SRI investors, SRI managers might then have more incentives than conventional managers to hold onto losing stocks if they feel their social value compensates for the economic loss. We hypothesize that SRI managers would be less prone to the disposition effect than conventional managers. Pertaining to the disposition effect, we do not find evidence of a difference in the behavior of SRI fund managers compared with that of conventional fund managers. Our results hold, even when considering market trends, management structure, gender, and prior performance.

Keywords: disposition effect; SRI mutual funds; portfolio managers (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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