Abstract
This article analyses the selectivity and market timing abilities of international Socially Responsible Investment (SRI) funds, from eight European markets, in comparison to conventional funds with similar characteristics. The results show that differences in market timing abilities of international SRI funds and their conventional peers are not statistically significant. However, SRI funds investing in European equities are significantly worse stock pickers than conventional funds, whereas for funds investing globally, selectivity abilities are similar among both fund groups. Hence, our results suggest that a broader investment universe might increase SRI fund managers’ stock picking abilities and, consequently, improve SRI fund performance.
Notes
1 We have also considered using European variables for the European equity funds, but our unreported analysis of predictability, using both simple and multiple regressions, showed that the global variables had a higher predictive power of European stock returns.
2 We have also used a conditional multi-factor version of Treynor and Mazuy (Citation1966) model and obtained similar results.