Recent years have witnessed an increasing growth in mutual funds that invest according to social criteria. As a consequence, the financial performance of these portfolios has attracted the interest of academics and practitioners. This paper investigates the performance of a sample of socially responsible mutual funds from seven European countries investing globally and/or in the European market. Using unconditional and conditional models, we assess the performance of these funds in comparison to conventional and socially responsible benchmark portfolios. The results show that European socially responsible funds present in general neutral performance in relation to both conventional and socially responsible benchmarks. However, performance estimates seem to be slightly higher when funds are evaluated in relation to socially responsible indices. Our results also show that socially responsible funds are more exposed to conventional than to socially responsible indices. Furthermore, conventional benchmarks are better able to explain fund returns than socially responsible benchmarks. These findings are robust to both unconditional and conditional models of performance. We also observe that conditional models lead to a slight improvement of performance estimates and to the explanatory power of the models, both when conventional and socially responsible benchmarks are considered. This is consistent with most previous empirical findings on conditional performance evaluation. Our results show that investors who wish to hold European funds can add social screens to their investment choices without compromising financial performance.

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This paper investigates the style and performance of US and European global socially responsible funds. Several specifications of the return-generating process are applied as well as their corresponding conditional versions.Most European global socially responsible funds do not show significant performance differences in relation to both conventional and socially responsible benchmarks. US funds and Austrian funds show evidence of underperformance. By applying conditional models, we find evidence of time-varying betas but not of time-varying alphas. With respect to investment style, we find evidence that socially responsible funds are strongly exposed to small cap and growth stocks. Although these results are consistent with previous studies, they uncover some misclassification issues in these funds. Finally, we also document a significant home bias for global socially responsible funds.

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