An assessment of variances and covariances of European SRI funds returns : does the intensity of extra-financial negative screening matter?

Yves Jégourel (1) , Samuel Maveyraud (2)

1 Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales
2 GREThA - Groupe de Recherche en Economie Théorique et Appliquée

Social responsible investment is surging in all industrial countries, despite the conventional wisdom that the inclusion of extra-financial criteria in the stock selection process should arm the financial performance of these funds. As a consequence, many papers have attempted to measure the financial performance of SRI funds and compared it to the performance of conventional funds with similar characteristics. According to this literature, we use a traditional CAPM model that allows for time-varying volatility to compare the risk-adjusted returns of several portfolios of SRI funds with differences in the intensity of extra-financial negative screening. Our key result shows that both alpha and beta are negatively correlated to the intensity of negative screenings. Thus, it appears that the risk-adjusted returns of SRI funds significantly differ from the returns of conventional funds if this latter criterion is taken into account.

Domaines: Economies et finances

Yves Jégourel, Samuel Maveyraud. An assessment of variances and covariances of European SRI funds returns : does the intensity of extra-financial negative screening matter?. 2010. ⟨hal-00646542⟩