Relative performance of religious and ethical investment funds

2020 ◽  
Vol 11 (6) ◽  
pp. 1227-1244 ◽  
Author(s):  
Esther Castro ◽  
M. Kabir Hassan ◽  
Jose Francisco Rubio ◽  
Zairihan Abdul Halim
Keyword(s):  
Mutual Funds ◽  
Performance Metrics ◽  
Relative Performance ◽  
Data Envelopment ◽  
Ethical Investment ◽  
Socially Responsible ◽  
Investment Funds ◽  
Content Type ◽  
Asset Pricing Models ◽  
The Cost

Purpose This paper updates the literature regarding the performance of constrained US mutual funds by looking at the relative performance of Christian mutual funds, socially responsible funds and Islamic funds. This paper aims to rank the performance of religious and ethical investment funds. Design/methodology/approach This study uses monthly returns from 2005 to 2015 to perform traditional asset pricing models as well as data envelopment analysis to determine rank. Findings Islamic mutual funds outperform socially responsible funds, which then outperform Christian-based mutual funds; these results are also consistent during the latest 2007-2008 crisis period. The results are robust to different performance metrics and benchmarks. Moreover, this paper reports a significant amount of money “left on the table” by investing in constraint funds and disregarding the sin industry which shows an ethical dilemma for investors. Practical implications Investors who seek to invest morally/ethically can be informed of the cost of doing so. They can also compare portfolio with others that have similar holdings and constraints. Originality/value This paper not only includes Christian mutual funds in the research but also provides the performance of all constrained assets. It also compares religious funds with “SIN” industry, and thus quantifies the cost of “doing right.”

The effect of business cycle, market return and momentum on financial performance of socially responsible investing mutual funds

2017 ◽  
Vol 13 (3) ◽  
pp. 513-528 ◽  
Author(s):  
Karen Paul
Keyword(s):  
Business Cycle ◽  
Financial Performance ◽  
Mutual Funds ◽  
Factor Model ◽  
Social Performance ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investing ◽  
Market Return ◽  
Three Factor

Purpose This study examines the effect of business cycle, market return and momentum on the financial performance of socially responsible investing (SRI) mutual funds using data from two complete business cycles as defined by the National Bureau of Economic Research (NBER). Design/methodology/approach A “fund of funds” approach is used to identify the extent to which SRI financial performance is affected by the macroeconomic climate. The Fama-French Three-Factor model and the Carhart four-factor model are used to bring the results into alignment with commonly used finance methodologies. Findings The results indicate that SRI tends to preserve value during economic contraction more than it adds value during economic expansion. Market return is important during both expansion and contraction, while momentum is important only during expansion. Research limitations/implications These findings suggest that double screening, for both financial and social performance, enables portfolio managers of SRI funds to have insight into those companies that are particularly vulnerable during times of economic contraction. Practical implications These results bring added clarity to the mixed findings found by previous researchers examining the relationship between corporate social performance (CSP) and financial performance. Social implications This study reinforces the idea that the financial performance of companies with high ethical standards is comparable to the financial performance of the market as a whole during times of economic expansion and superior to the market as a whole during times of economic contraction. Originality/value Business cycle analysis, along with the Fama-French Three-Factor model and the Carhart four-factor model, brings SRI research more into the realm of conventional financial analysis than previous studies.

Investigating cost efficiency in the branch network of a Greek bank: an empirical study

2008 ◽  
Vol 34 (3) ◽  
pp. 160-171 ◽  
Author(s):  
Athanasios G. Noulas ◽  
Niki Glaveli ◽  
Ioannis Kiriakopoulos
Keyword(s):  
Regression Analysis ◽  
Commercial Bank ◽  
Cost Efficiency ◽  
Comparative Evaluation ◽  
Design Methodology ◽  
Future Research ◽  
Data Envelopment ◽  
Content Type ◽  
Dea Method ◽  
The Cost

PurposeThe purpose of this study is to examine the cost efficiency of 58 branches of a major Greek commercial bank, in six major Greek cities, for the years 2000 and 2001.Design/methodology/approachThe efficiency is measured through the data envelopment analysis (DEA) method. Using regression analysis, the effect of size on cost efficiency is also examined.FindingsThe results indicate that there is a room for substantial efficiency improvements. The average inefficiency is about 30 per cent. It has also been observed that rural branches tend, on average, to be more efficient than urban branches.Research limitations/implicationsA direction of future research would be to extend the analysis of determinants of bank branch efficiency in order to investigate the role that the region and the characteristics of the branch play in relation to efficiency.Originality/valueThe paper provides a comparative evaluation of the efficiency of 58 branches of a major Greek commercial bank using the DEA method.

Under pressure: exploring pressures for corporate social responsibility in mutual funds

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Caddie Putnam Rankin
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Industry Standards ◽  
Corporate Social ◽  
Depth Interviews

PurposeThis empirical study seeks to understand how mutual fund firms interpret conflicting pressures to conform or differentiate in the context of corporate social responsibility (CSR). Research suggests that organizations engage in practices that conform to industry standards in order to be seen as legitimate members of their industry. Other studies suggest that organizations differentiate themselves in order to compete and outperform their rivals. Pressures for organizational conformity and differentiation are explored in two types of organizations in the mutual fund industry: socially responsible investment (SRI) and non-SRI firms.Design/methodology/approachThe research is based on qualitative in-depth interviews with twenty-six mutual funds.FindingsThe analysis revealed that pressures for conformity and differentiation were salient among mutual fund executives but emphasized differently for the two types of mutual funds.Originality/valueThe study concluded by suggesting SRI firms use both strategies of conformity and differentiation to amplify the message that they adhere to the values of CSR.

NEW DEA PERFORMANCE EVALUATION INDICES AND THEIR APPLICATIONS IN THE AMERICAN FUND MARKET

2008 ◽  
Vol 25 (04) ◽  
pp. 421-450 ◽  
Author(s):  
RUIYUE LIN ◽  
ZHIPING CHEN
Keyword(s):  
Performance Evaluation ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Risk Measures ◽  
Relative Performance ◽  
Programming Approach ◽  
Data Envelopment ◽  
Performance Variation ◽  
Mathematical Programming Approach ◽  
Return Distributions

The data envelopment analysis (DEA) method is a mathematical programming approach to evaluate the relative performance of portfolios. Considering that the risk input indicators of existing DEA performance evaluation indices cannot reflect the pervasive fat tails and asymmetry in return distributions of mutual funds, we originally introduce new risk measures CVaR and VaR into inputs of relevant DEA indices to measure relative performance of portfolios more objectively. To fairly evaluate the performance variation of the same fund during different time periods, we creatively treat them as different decision making units (DMUs). Different from available DEA applications which mainly investigate the American mutual fund performance from the whole market or industry aspect, we analyze in detail the effect of different input/output indicator combinations on the performance of individual funds. Our empirical results show that VaR and CVaR, especially their combinations with traditional risk measures, are very helpful for comprehensively describing return distribution properties such as skewness and leptokurtosis, and can thus better evaluate the overall performance of mutual funds.

Style-changing behaviour in the socially responsible mutual fund industry: consequences on financial and sustainable performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernando Muñoz ◽  
María Vargas ◽  
Ruth Vicente
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Fixed Effects ◽  
Socially Responsible ◽  
Content Type ◽  
Sustainable Performance ◽  
Panel Regressions ◽  
Money Flows ◽  
Socially Responsible Mutual Funds ◽  
Performance Ranking

Purpose This study aims to examine style-deviation practices in the socially responsible mutual funds (SMRF) industry i.e. how mutual funds game their stated financial objectives to earn a higher relative performance ranking. In addition, the consequences of such practices on sustainable scores and money flows are studied. Design/methodology/approach A sample of 454 US equity SRMFs is studied. This paper uses panel regressions controlling for time and style fixed-effects. Findings This study finds that 17.60% of SRMF managers in the sample are engaged in style deviation practices. These practices positively impact the sustainable performance of SRMFs and negatively impact their financial performance. One effect offsets the other and they consequently do not affect money flows. Another finding is that only investors with lower portfolio sustainability scores do show return-chaser behaviour. Practical implications This paper reveals that SRMF managers deviating from their stated financial style face a dilemma that is non-existent for their conventional peers that is style deviation practices affect financial and sustainable performance in opposing ways, whereas SRMF investor utility depends positively on both dimensions. The findings are not conclusive about the effectiveness of style deviation practices in attracting SRMF money flows. Social implications SRMF industry has experienced tremendous growth in the past decade. The increased competition in this industry has led managers to strive to attract investors, sometimes by relying on irregular practices that enhance their portfolio results. Regulators should consider how to avoid such perverse behaviour with a view to improving mutual funds transparency. Originality/value This is the first research that analyses style deviation practices and their consequences for the SRMF industry.

Impact of competition on fund disclosures and consumer search costs

2019 ◽  
Vol 18 (2) ◽  
pp. 198-220
Author(s):  
Sitikantha Parida
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Market Competition ◽  
Search Costs ◽  
Consumer Search ◽  
Relative Performance ◽  
Policy Implications ◽  
Content Type ◽  
The Impact ◽  
Illiquid Assets

Purpose The purpose of this paper is to investigate the impact of competition in financial markets on the frequency of portfolio disclosures by mutual funds and its implications for consumer search costs. Design/methodology/approach The empirical analysis merges the Center for Research in Security Prices (CRSP) survivorship bias-free mutual fund database, the Thompson Financial CDA/ Spectrum holdings database and the CRSP stock price data. The sample covers the time period between 1993 and 2010 and OLS and logistic regressions are used to investigate the impact of competition on fund disclosures. Findings This paper finds that mutual fund disclosures decrease with market competition and this effect is amplified for funds holding illiquid assets. These results provide empirical support for the findings of Carlin et al. (2102). Mutual funds use portfolio disclosures as a marketing tool to attract investments in a tournament-like market, where superior relative performance and greater visibility are rewarded with convex payoffs. With competition, the likelihood of receiving new investments decreases for each fund and funds respond by reducing costly voluntary disclosures. The disclosure costs are higher for funds holding illiquid assets, and hence, the effect is stronger for them. Originality/value This paper has important policy implications for disclosures in a market where relative performance matters. The traditional view is that competition induces voluntary disclosure because entities would like to differentiate themselves from competitors, and hence, competition should increase market transparency. However, this paper sheds light on the negative consequence of competition in a tournament-like mutual fund market.

Socially responsible investing: a review of the critical issues

2015 ◽  
Vol 41 (11) ◽  
pp. 1176-1201 ◽  
Author(s):  
Joan Junkus ◽  
Thomas D. Berry
Keyword(s):  
Mutual Funds ◽  
Firm Value ◽  
Socially Responsible Investing ◽  
Model Specification ◽  
Future Research ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Definitive Answer ◽  
Responsible Investing

Purpose – The purpose of this paper is to provide a review of the most recent work in major finance journals on socially responsible investment (SRI). While SRI involves individual investors, firms, and investment managers, the authors concentrate primarily on the investment view. Design/methodology/approach – The authors briefly review the development of socially responsible investing (SRI) and the theoretical issues related to SRI and investment choice. This is followed by a review of the empirical results concerning firm value. The question of whether SR mutual funds and SR indexes differ in performance or other characteristics from their conventional counterparts is discussed next, and lastly the authors present suggestions for future research directions. Findings – Despite the large and extensive amount of empirical research published on SRI in recent years, the authors find no definitive answer to the question of SR actions for either the firm or the investor. For firms, evidence linking corporate social responsibility (CSR) rankings with higher value is mixed, and depends on the type of CSR behavior studied as well as the measures of firm performance used. The performance of SR mutual funds and indexes generally are not significantly different from conventional funds or indexes, but again these results are also highly dependent on model specification, time period, benchmark, and other characteristics of the study. Practical implications – The value of SR investing has not been definitely proved. This means, however, that there is room for further on this important topic. Originality/value – This paper synthesizes and presents the most recent research on SRI from a wide variety of refereed sources.

Sustainability-themed mutual funds: an empirical examination of risk and performance

2018 ◽  
Vol 19 (3) ◽  
pp. 247-261 ◽  
Author(s):  
Federica Ielasi ◽  
Monica Rossolini ◽  
Sara Limberti
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Fund Managers ◽  
And Performance ◽  
Sustainable And Responsible Investment ◽  
Ethical Funds

PurposeThis paper aims to analyze the portfolio characteristics and the performance measures of sustainability-themed mutual funds, compared to ethical mutual funds that implement different sustainable and responsible investment strategies.Design/methodology/approachThe study refers to a European sample of 106 ethical funds and 51 sustainability-themed funds. The monthly performance of each fund is downloaded from Bloomberg for the period from January 1996 to December 2015. By applying a Fama and French (1993) three-factor model, the authors overcome the limits of a capital asset pricing model (CAPM) based-single index model, to compare the performance of the two categories of funds.FindingsSustainability-themed funds do not differ significantly from ethical funds in terms of portfolio attributes, except for market capitalization, age and net asset value. Regarding performance measures, the results shows that sustainability-themed funds have a lower underperformance than ethical funds (as measured by Jensen’s alpha), whereas the samples do not differ in terms of market risk (as measured by Beta coefficient). The idiosyncratic risk of sustainability-themed funds is positively influenced by the specific portfolio strategies. The sustainability-themed funds show a higher concentration in the industrial sector and a lower exposure to financial sector than ethical funds; in terms of geographical strategy, they are more global and international oriented; they mainly focus on small caps and value stocks.Research limitations/implicationsThe different sustainable and responsible investment strategies can be applied simultaneously and in a growing number of possible combinations. Mutual fund managers can consider thematic approach as an efficient opportunity for reconciling financial performance and economic sustainability. It is demonstrated that sustainability-themed funds adopt a portfolio strategy significantly different from ethical funds and from the environmental, social and governance benchmarks. Mutual fund managers implement a thematic specialization without any negative impact on the funds returns compared to ethical funds; actually, with a proper diversified portfolio, they are able to reduce idiosyncratic risk.Originality/valueThe analysis is extremely innovative, especially for the thematic sample. During the past 15 years, literature about sustainable and responsible investment has been focused especially on the differences in terms of risk and performance between socially responsible and conventional funds. This paper, starting from the methodology applied in these studies, wants to compare two different types of socially responsible strategies, with a specific focus on sustainability-themed mutual funds, given their exponential growth in the past few years.

Performance metrics analysis for aircraft maintenance process control

2014 ◽  
Vol 20 (2) ◽  
pp. 122-134 ◽  
Author(s):  
Kevin M. Taaffe ◽  
Robert William Allen ◽  
Lindsey Grigg
Keyword(s):  
Performance Metrics ◽  
Performance Measurements ◽  
Content Type ◽  
Root Cause ◽  
Continuous Improvement Process ◽  
Performance Metric ◽  
The Right ◽  
The Cost ◽  
And Behavior ◽  
Maintenance Process

Purpose – Performance measurements or metrics are that which measure a company's performance and behavior, and are used to help an organization achieve and maintain success. Without the use of performance metrics, it is difficult to know whether or not the firm is meeting requirements or making desired improvements. During the course of this study with Lockheed Martin, the research team was tasked with determining the effectiveness of the site's existing performance metrics that are used to help an organization achieve and maintain success. Without the use of performance metrics, it is difficult to know whether or not the firm is meeting requirements or making desired improvements. The paper aims to discuss these issues. Design/methodology/approach – Research indicates that there are five key elements that influence the success of a performance metric. A standardized method of determining whether or not a metric has the right mix of these elements was created in the form of a metrics scorecard. Findings – The scorecard survey was successful in revealing good metric use, as well as problematic metrics. In the quality department, the Document Rejects metric has been reworked and is no longer within the executive's metric deck. It was also recommended to add root cause analysis, and to quantify and track the cost of non-conformance and the overall cost of quality. In total, the number of site wide metrics has decreased from 75 to 50 metrics. The 50 remaining metrics are undergoing a continuous improvement process in conjunction with the use of the metric scorecard tool developed in this research. Research limitations/implications – The metrics scorecard should be used site-wide for an assessment of all metrics. The focus of this paper is on the metrics within the quality department. Practical implications – Putting a quick and efficient metrics assessment technique in place was critical. With the leadership and participation of Lockheed Martin, this goal was accomplished. Originality/value – This paper presents the process of metrics evaluation and the issues that were encountered during the process, including insights that would not have been easily documented without this mechanism. Lockheed Martin Company has used results from this research. Other industries could also apply the methods proposed here.

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