Ethical investing in Australia: Is there a financial penalty?

Bauer, Rob; Otten, Rogér; Rad, Alireza Tourani

doi:10.1016/j.pacfin.2004.12.004

Cited by 228 publications

(133 citation statements)

References 33 publications

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“…In the Australian context, there are relatively few studies such as those of (Bauer et al, 2006;Tippet, 2001;Cummings, 2000) which show that the performance of SRI is not significantly different with conventional investments while other studies (Jones et al, 2008) found SRI to be underperforming in the Australian context. None of these studies, however, have focused on the linkages or spill-over between SRI markets.…”

Section: Brief Review Of the Literaturementioning

confidence: 98%

Investigation of Socially Responsible Investment Markets (SRI) Using Dynamic Conditional Correlation (DCC) Method: Implications for Diversification

T.¹

2010

Journal of Mathematics and Statistics

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Problem statement: Over the last ten years there has been a phenomenal growth in the amount of funds placed in SRI globally estimated to be around US$6.5 trillion while around US$55 billion in the Australian market. Accurate knowledge of correlation of the Australian SRI market with other SRI markets overseas is crucially important for Australian (SRI) investors for international portfolio diversification since portfolio diversification theory posits that the lower (higher) the correlation between markets, the higher (lower) the gains to be made. The study examines the relationship of the Australian SRI market with fourteen other markets-Canada, Denmark, France, Germany, Hong Kong, Ireland, Japan, Netherlands, Norway, South Africa, Sweden, Switzerland, United Kingdom and the United States. Approach: The relationships of the Australian Socially Responsible Investment (SRI) market with other SRI markets worldwide during the period 1994-2009 are examined based on the dynamic conditional correlation multivariate GARCH model (DCCMVGarch). In the DCC method, the multivariate conditional variance estimation is simplified by estimating univariate GARCH models for each market. Using the transformed residuals resulting from the first stage, the authors can estimate a conditional correlation estimator. The standard errors for the first stage parameters remain while the standard errors for the correlation parameters are modified. Results: Our results showed that the Australian market experienced a surge in correlation with all other markets during the global financial crisis. During the period of study, the correlation of Australia with Canada, Denmark, Norway and the United Kingdom increased over time while its correlation with other countries remained stationary. This implies that the Australian SRI market is becoming more integrated with those of Canada, Denmark, Norway and the United Kingdom. Therefore, these overseas markets provide less portfolio diversification benefits to Australian SRI investors while the other markets still offer some opportunities. Conclusion/Recommendations: This study examined the relationship of the Australian Socially Responsible Investment (SRI) market with other SRI markets worldwide during the period 1994-2009 based on dynamic conditional correlation multivariate GARCH model that provides accurate correlations over time that can be incorporated into portfolio models. Australian SRI market was analyzed with fourteen other markets around the world such as Canada, Denmark, France, Germany, Hong Kong, Ireland, Japan, Netherlands, Norway, South Africa, Sweden, Switzerland, United Kingdom and the United States. The results showed that the Australian market experienced a spike in correlation with the other markets during periods of market distress; for example, during the recent global financial crisis. In spite of the fluctuations in the correlations of Australian with the other markets the correlations generally remain below 1. Australia's correlation with Denmark, Norway and Japan in...

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Section: Brief Review Of the Literaturementioning

confidence: 98%

Investigation of Socially Responsible Investment Markets (SRI) Using Dynamic Conditional Correlation (DCC) Method: Implications for Diversification

T.¹

2010

Journal of Mathematics and Statistics

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“…The portfolio theory showed that a restriction on financial investments will generate a poorer risk adjusted return (Jansson et al 2011;Schröder 2004). Based on that, selecting a portfolio determined by ethical screening can be identified as a high value practice that may last with no negative impact on the investment's return (Bauer et al 2006). Therefore, investors are willing to receive lesser returns in return for better sustainability in the world (Hamilton et al 1993).…”

Section: Portfolio Theory Perspectivementioning

confidence: 99%

The Performance of Socially Responsible Investments in Indonesia: A Study of the Sri Kehati Index (SKI)

Zulkafli

Ahmad

2017

GADJAH MADA INT. J. BUS.

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This study examines the performance of the Sri Kehati Index (SKI) against the Jakarta Composite Index (JCI) as the market index, using respective daily index prices from the 1 st of January 2009 to the 31 st of December 2014. This study uses the risk-adjusted return of Sharpe's Index, the Adjusted Sharpe's Index (ASI), Treynor's Index, Jensen's Alpha Index, the Adjusted Jensen's Alpha Index (AJI) and Sortino's Ratio to examine the performance of the SKI and the JCI. Except for Sharpe's Index and the Adjusted Sharpe's Index, the risk-adjusted return performance of the SKI (Treynor, Jensen's Alpha, Adjusted Jensen's Alpha and Sortino) outperforms the JCI as the conventional benchmark. However, Jensen's Alpha is the only performance measure that is significant and therefore supports that the SKI outperforms the JCI during the overall period from 2009 to 2014. As there is a contradiction between the adjusted returns of Sharpe's Index/Adjusted Sharpe's Index and Jensen's Alpha Index, the hypothesis that the SKI presents a higher risk adjusted performance than the JCI does, it cannot be accepted. Even though the performance of SKI in this study is slightly lower over the whole period of the study, it is still generating competitive returns. Abstrak: Penelitian ini menguji kinerja Sri Kehati Indeks (SKI) terhadap Indeks Harga Saham Gabungan (IHSG) sebagai indeks pasar, dengan menggunakan harga indeks harian masing-masing dari 1 Januari

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“…King and Lenox (2001) also identified a positive correlation between environmental performance and financial performance. Statman (2000), Schröder (2004), Elsayed and Paton (2004), Benson, Brailsford, and Humphrey (2006), Statman (2006), Bauer, Otten, and Rad (2006), Stenström and Thorell (2007), Statman and Glushkov (2008), Cortez et al (2009), Machado, Machado, andCorrar (2009) compared the performance of responsible funds/indexes against the performance of conventional funds/indexes and they concluded that differences between the returns are not statistically significant. Machado et al (2009) argued that the comparable returns of the indexes can be explained by the fact that a significant number of companies are comprised in more than one index at the same time.…”

Section: Literature Reviewmentioning

confidence: 99%

Socially Responsible Investment: A Comparison between the Performance of Sustainable and Traditional Stock Indexes

Curto¹,

Vital²

2014

J. Rev. Global Econ.

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Abstract:The doubt about whether socially responsible investment is a viable strategy for investors seeking to maximize both social and financial returns is the central question of this paper. This is addressed by investigating whether portfolio selection based on sustainability criteria harms investor's returns, or in contrast it can be a driver of superior financial benefits. With this purpose, daily prices and returns of 4 traditional and 10 sustainable stock indexes are analyzed from 2001 to 2011 and in the peaks and downs of both bull and bear markets. One of the major results of this study is that sustainable indexes outperform traditional stock indexes in all the periods under analysis; however the differences on average returns are not statistically significant. Through unit root tests we acknowledge that returns are stationary and levels are nonstationary. The short-run relationship analysis based on Granger causality test reveals a feedback effect between traditional and sustainable stock indexes returns. In contrast, long-run relationship, based on cointegration analysis, points that most of the stock indexes are not cointegrated, suggesting that sustainable and traditional stock indexes do not have a long-run linkage and thus can diverge without bound.

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Ethical investing in Australia: Is there a financial penalty?

Cited by 228 publications

References 33 publications

Investigation of Socially Responsible Investment Markets (SRI) Using Dynamic Conditional Correlation (DCC) Method: Implications for Diversification

Investigation of Socially Responsible Investment Markets (SRI) Using Dynamic Conditional Correlation (DCC) Method: Implications for Diversification

The Performance of Socially Responsible Investments in Indonesia: A Study of the Sri Kehati Index (SKI)

Socially Responsible Investment: A Comparison between the Performance of Sustainable and Traditional Stock Indexes

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