Distance bias of socially responsible investment

2018 ◽  
Vol 14 (1) ◽  
pp. 96-110 ◽  
Author(s):  
En Te Chen ◽  
Yunieta Anny Nainggolan
Keyword(s):  
Portfolio Choice ◽  
Distance Effect ◽  
Future Research ◽  
Home Equity ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Local Bias ◽  
Socially Responsible Investments ◽  
Fund Portfolio

Purpose Despite the benefits of international diversification, the home equity bias phenomenon is well documented in the portfolio choice literature. The purpose of this paper is to investigate whether the same investment behavior applies to domestic socially responsible investments (SRIs) where ethical screenings should be the selection criteria. Design/methodology/approach The authors apply the model by Coval and Moskowitz (1999), Grinblatt and Keloharju (2001) and Agarwal and Hauswald (2010) to uncover the effect of distance relative to screenings on SRI domestic portfolio choice. For the first time, the authors test the robustness of distance effect by using time bias, which is the travel time between the fund manager and the company’s headquarter. Findings The authors find that SRIs exhibit a strong preference for locally headquartered firms. After controlling for screening activity and other fund characteristics, the authors still find a strong distance bias in SRI fund portfolio decision-making. The authors find that this bias is mostly observed in SRI fund with social screening and that fund holding characteristics determine the propensity of fund managers to invest locally. The results suggest that the local bias puzzle exists in SRI. Research limitations/implications This study provides avenue for future research to examine whether the same local bias is found in SRI investment in other countries where they have different characteristics and behavior. Also, the evidence that local bias exists in SRI investment may need further analysis as to whether this is conflicting with the objectives of SRI, which focus more on ethical beliefs. Practical implications The results suggest that many local firms in the same city currently held by an SRI fund will not be held by this fund if it is in another city. The implications of the findings are that geographic proximity, along with ethical screenings, is an important dimension to how SRI fund invests. Originality/value This study is the first that examines local bias in SRI funds by using portfolio holding data.

Private ethical fund investors across countries and time: a survey-based review

2015 ◽  
Vol 7 (4) ◽  
pp. 379-411 ◽  
Author(s):  
Anett Wins ◽  
Bernhard Zwergel
Keyword(s):  
Keyword Search ◽  
Relevant Literature ◽  
Future Research ◽  
Socially Responsible ◽  
Screening Criteria ◽  
Content Type ◽  
Responsible Investment ◽  
Private Investors ◽  
Ethical Funds ◽  
Fund Portfolio

Purpose – This paper aims to provide an overview of the literature to point out similarities and differences among private ethical investors across countries and time. Over the past three decades, many surveys have been conducted to advance the understanding of the demographic characteristics, motivation and morals of private ethical investors across countries and time. To date, the survey-based evidence on private investors into ethical funds is geographically rather segmented, and the research questions are fairly diverse. This permits only very temporally or regionally selective conclusions. Thereby, the authors identify interesting topics for future research. Design/methodology/approach – To identify the relevant literature for our review, the authors carried out a structured Boolean keyword search using major library services and databases. Findings – When questions about negative screening criteria are presented in a direct investment context, the consensus of private ethical investors “worldwide” (on average) is that social screening issues are most important, followed by ecological and moral topics. The percentage of ethical funds in the fund portfolio of the average private ethical investor in Europe seems to increase when the investor exhibits high degrees of pro-social attitudes and perceived consumer effectiveness. European private ethical investors are of the opinion that ethical funds perform worse but are less risky than conventional funds. Practical implications – The authors make suggestions on how investment companies should design their funds so that they can attract more socially responsible investors. Originality/value – The paper is of particular value because it focuses on private investors in the fast growing retail market of socially responsible investment funds.

Socially responsible investment sukuk (Islamic bond) development in Malaysia

2020 ◽  
Vol 12 (4) ◽  
pp. 599-619
Author(s):  
Mahfuzur Rahman ◽  
Che Ruhana Isa ◽  
Ginanjar Dewandaru ◽  
Mohamed Hisham Hanifa ◽  
Nazreen T. Chowdhury ◽  
...  
Keyword(s):  
Sample Size ◽  
Small Sample Size ◽  
Socially Responsible Investment ◽  
Small Sample ◽  
Future Research ◽  
Large Sample Size ◽  
Structured Interviews ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment

Purpose This study aims to explore the underlying issues related to the development of socially responsible investment (SRI) sukuk in Malaysia. It identifies factors attracting investors and issuers, as well as challenges for the development of SRI sukuk (Islamic bond) in Malaysia. Design/methodology/approach This study conducted semi-structured interviews to collect data from the institutional investors, SRI sukuk issuers and arrangers, as well as researchers. A total of 19 experts were approached in which 10 participated in the interview. The thematic analysis technique is used to report the findings. Findings This study uncovers that social contribution through business activities (i.e. investment in the education sector) is the key motivational drivers for the investors and issuers. Besides, investment risks, lack of performance measurement standards, high transaction costs, risks of return, shortage of enough Islamic bonds, investors’ confidence and lack of awareness are the major challenges for the development of SRI sukuk instruments. Research limitations/implications Due to the challenges in finding experts on this subject matter, this study was able to manage only 10 interviews from the participants, which is a small sample size. However, the findings of this study cannot be ignored. Future research should carry out with a large sample size (i.e. at least 30 interviews) to validate the current findings. Originality/value This study is among the pioneer in Malaysia, which explores the influencing factors of selecting Islamic bonds as an investment option. This paper provides some valuable implications for investors through discovering the challenges for the growth of SRI sukuk in Malaysia, which can also be applicable in a global setting.

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.

scholarly journals A Brief Review of Responsible AI and Socially Responsible Investment in Financial and Stock Trading

2021 ◽  
Author(s):  
A. K. M. Amanat Ullah ◽  
Samiha Sultana ◽  
Fahim Faisal ◽  
Md. Muzahidul Islam Rahi ◽  
Md. Ashraful Alam ◽  
...  
Keyword(s):  
Ethical Decision Making ◽  
Research Work ◽  
Machine Learning Techniques ◽  
Future Research ◽  
Socially Responsible ◽  
Research Directions ◽  
Responsible Investment ◽  
Learning Techniques ◽  
Socially Responsible Investments ◽  
Future Research Directions

Automated trading is used in most of the major markets of our world. In order to ensure sustainable development, incorporating ethical and socially responsible ideas while designing these Artificial Intelligence (AI) systems has become a necessity. Both the industry and the academia are working towards Responsible AI, which can make Socially Responsible Investments (SRI). This paper reviews the research on SRI investment in the financial sector and evaluates these methods, which can help find future research directions in Computational Finance. This survey looks at the machine learning techniques used for ethical decision-making while stock or forex trading, which will benefit any further research work on Responsible AI in Finance.<br>

Rational socially responsible investment

2014 ◽  
Vol 14 (5) ◽  
pp. 699-713 ◽  
Author(s):  
Benjamin Tobias Peylo
Keyword(s):  
Stock Market ◽  
Future Research ◽  
Optimization Approach ◽  
Literature Study ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Depth Analysis ◽  
German Stock ◽  
Rational Investment

Purpose – The purpose of this paper is first to give an in-depth discussion of the criticism of socially responsible investment's (SRI) alleged incompatibility with the concept of rational investment constituting an inferiority to conventional investment so as to disprove unwarranted arguments and identify potential for improvement of SRI. The second objective is to propose a framework that places SRI and conventional investment on the same level of rationality. Methodology – The discussion is based on a literature study. The framework uses a previously published multidimensional optimization approach and embeds it into a new, integrated methodology for investment decisions in the presence of SRI objectives. The framework is empirically evaluated using historic stock market data. Findings – The main findings show that SRI is not necessarily less rational than conventional investment; it can be implemented in an equally stringent and clearly defined methodology. The empirical results prove that investors can pursue SRI objectives without sacrificing performance. Research limitations – Focus is on the German stock market; in the future, research will be expanded to cover international markets. Practical implications – The results may contribute to enhance the SRI methodology. Social implications – Investors may be encouraged to consider SRI, strengthening the concept of sustainability. Originality/value – In the literature, the question of SRI’s compatibility with rational investment has often been cited but seldom scrutinized. An in-depth analysis combined with a framework to exploit of the learnings has yet been missing.

The liquidity, performance and investor preference of socially responsible investments

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jennifer Brodmann ◽  
Phuvadon Wuthisatian ◽  
Rama K. Malladi
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
Excess Return ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Socially Responsible Investments ◽  
Significant Difference ◽  
Investor Preference

PurposeThe purpose of the paper is to analyze socially responsible investment (SRI) asset performance compared to traditional assets using the MSCI KLD 400 Index. The authors examine the required return that investors expect to maintain their holdings in SRI stock and whether SRI stocks can be used for diversification during financial crises.Design/methodology/approachThe authors examine SRI stocks' liquidity from the MSCI KLD 400 index, encompassing all environmental, social and governance (ESG) factor investments over 25 years, from 1990 until 2019. The authors test whether sorting portfolios based on their excess return, liquidity and volatility can explain the difference in SRI and non-SRI stocks' returns and then examine the global financial crisis' (GFC) impact on excess returns for SRI and non-SRI assets.FindingsThe authors find a significant difference in liquidity and volatility between SRI and non-SRI stocks and that SRI stocks perform better during financial crises. The results suggest a possible general investor preference to invest in non-SRI stocks despite our findings that SRI stocks tend to withstand financial risk better than non-SRI stocks. The authors find that long-term investors may be willing to forego short-term gains to reduce their overall risk exposure during crises.Originality/valueSRI is gaining international popularity as an alternative investment that includes ratings based on ESG factors. Previous studies provide mixed results of whether SRI stocks outperform conventional stocks. In addition, there is limited research examining the liquidity and volatility of SRI assets. The authors compare the differences between SRI and non-SRI stocks in terms of excess return, volatility and liquidity and compare the liquidity of SRI and non-SRI stocks during the financial crisis.

scholarly journals The Demography of Socially Responsible Investors across Countries and Time: A Systematic Review

2018 ◽  
Vol 7 (2) ◽  
pp. 7-15
Author(s):  
Anjum Ubaid Siddiqui
Keyword(s):  
Financial Risk ◽  
Socially Responsible Investment ◽  
Future Research ◽  
Socially Responsible ◽  
Responsible Investment ◽  
The Past ◽  
Socially Responsible Investments ◽  
Gender Education ◽  
Future Research Directions ◽  
Socio Demographic Factors

The field of investment has received considerable changes in recent years. Over the past decade one of the major trends in the finance domain is the emergence of Socially Responsible Investments, reflecting the increasing awareness of investors to social and environmental and corporate governance issues. Over the past three decades many surveys have been conducted to understand and segment the demographic profile of socially responsible investors. This article aims to provide an overview of the existing literature on the demographic characteristics of socially responsible investors that has been studied across countries and time .We have limited our focus to insights generated by the articles specifically, dealing with relative influence of socio-demographic factors on the attitude towards Socially Responsible Investment, as opposed to broadening the scope of our inquiry to a larger set of studies related to the SRI such as fund performance, financial risk/return characteristics etc. The articles published have been classified into four broad demographic categories viz. Age, Gender, Education and Income on the basis of the importance of each category in context of Socially Responsible Investment. Finally the conclusion and future research directions are suggested which would be of importance for both academicians and investment world.

scholarly journals A Brief Review of Responsible AI and Socially Responsible Investment in Financial and Stock Trading

2021 ◽  
Author(s):  
A. K. M. Amanat Ullah ◽  
Samiha Sultana ◽  
Fahim Faisal ◽  
Md. Muzahidul Islam Rahi ◽  
Md. Ashraful Alam ◽  
...  
Keyword(s):  
Ethical Decision Making ◽  
Research Work ◽  
Machine Learning Techniques ◽  
Future Research ◽  
Socially Responsible ◽  
Research Directions ◽  
Responsible Investment ◽  
Learning Techniques ◽  
Socially Responsible Investments ◽  
Future Research Directions

Automated trading is used in most of the major markets of our world. In order to ensure sustainable development, incorporating ethical and socially responsible ideas while designing these Artificial Intelligence (AI) systems has become a necessity. Both the industry and the academia are working towards Responsible AI, which can make Socially Responsible Investments (SRI). This paper reviews the research on SRI investment in the financial sector and evaluates these methods, which can help find future research directions in Computational Finance. This survey looks at the machine learning techniques used for ethical decision-making while stock or forex trading, which will benefit any further research work on Responsible AI in Finance.<br>

scholarly journals Inertia and discounting in the selection of socially responsible investments

2016 ◽  
Vol 2 (1) ◽  
pp. 29-47 ◽  
Author(s):  
Pat Auger ◽  
Timothy Devinney ◽  
Grahame Dowling ◽  
Christine Eckert
Keyword(s):  
Decision Making ◽  
Experimental Approach ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Individual Level ◽  
Risk Return ◽  
Socially Responsible Investments ◽  
Developed World ◽  
Selection Of

Purpose Socially responsible investment (SRI) funds have grown dramatically as an investment alternative in most of the developed world. The paper aims to discuss this issue. Design/methodology/approach This study uses a structured experimental approach to determine if the decision-making process of investors to invest in SRIs is consistent with the process used for conventional investments. The theoretical framework draws on two widely studied concepts in the decision making and investment literature, namely, inertia and discounting. Findings The authors find that inertia plays a significant role in the selection of SRI funds and that investors systemically discount the value of SRIs. Research limitations/implications The results suggest that SRIs need to be designed to cater to the risk/return profiles of investors and that these investors need to be better informed about the performance of SRIs vs conventional investments to reduce their systematic discounting. Originality/value Unique experimental approach applied to investment alternatives in a manner that captures individual level variation.

Internet gambling stock returns: empirical evidence from the UK

2017 ◽  
Vol 13 (1) ◽  
pp. 36-49
Author(s):  
Daniel Perez Liston
Keyword(s):  
Stock Returns ◽  
Multivariate Garch ◽  
Online Gambling ◽  
Future Research ◽  
Time Varying ◽  
Conditional Correlation ◽  
Socially Responsible ◽  
Content Type ◽  
Starting Point ◽  
The Uk

Purpose The purpose of this paper is to quantify beta for an online gambling portfolio in the UK and investigates whether it is time-varying. It also examines the dynamic correlations of the online gambling portfolio with both the market and socially responsible portfolios. In addition, this paper documents the effect of important UK gambling legislation on the betas and correlations of the online gambling portfolio. Design/methodology/approach This study uses static and time-varying models (e.g. rolling regressions, multivariate GARCH models) to estimate betas and correlations for a portfolio of UK online gambling stocks. Findings This study finds that beta for the online gambling portfolio is less than 1, indicative of defensiveness toward the market, a result that is consistent with prior literature for sin stocks. In addition, the conditional correlation between the market and online gambling portfolio is small when compared to the correlation of the market and socially responsible portfolios. Findings suggest that the adoption of the Gambling Act 2005 increases the conditional correlation between the market and online gambling portfolio and it also increases the conditional betas for the online gambling portfolio. Research limitations/implications This paper serves as a starting point for future research on online gambling stocks. Going forward, studies can focus on the financial performance or accounting performance of online gambling stocks. Originality/value This empirical investigation provides insight into the risk characteristics of publicly listed online gambling companies in the UK.

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