Stock-picking and style-timing abilities: a comparative analysis of conventional and socially responsible mutual funds in the US market

Muñoz, Fernando; Vicente, Ruth; Agudo, Luis Ferruz

doi:10.1080/14697688.2013.832833

Cited by 21 publications

(12 citation statements)

References 34 publications

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“…A possible explanation for this result is the fact that SRI fund 21 Evidence of "perverse" market timing abilities is also found by many previous studies on conventional funds (e.g., Ferson & Schadt, 1996;Sawicki & Ong, 2000) and by most of the existing studies on SRI mutual funds (e.g., Ferruz, Muñoz, & Vargas, 2010;Gregory & Whittaker, 2007;Kreander et al, 2005;Muñoz et al, 2014;Renneboog et al, 2008). 22 Muñoz et al (2015) also find evidence that both SRI and conventional fund managers in the US successfully time the book-to-market factor. However, their results refer to the whole sample period (1994-2010), since they do not separate timing abilities across crisis and non-crisis periods.…”

Section: Managerial Abilities In Crisis and Non-crisis Periodssupporting

confidence: 59%

“…Ferruz et al (2012) show that religious mutual funds underperform conventional funds not only in terms of their stock-picking abilities, but also because they cannot time any investment style, unlike their conventional peers, which show positive ability to time the size and book-to-market styles. In turn, Muñoz et al (2015) find little differences between US SRI and conventional mutual fund managers, with both groups exhibiting negative selectivity abilities, positive size and bookto-market timing skills and an inability to time the market or the momentum factor. Besides, as far as we are aware of, only Muñoz et al (2014) analyse style-timing abilities during crisis and non-crisis periods.…”

Section: Literature Reviewmentioning

confidence: 87%

“…Although the issue of market timing abilities of mutual fund managers has been extensively explored in the finance literature, there are only a few studies that address managers' timing abilities with respect to their investment styles or market segments (e.g., Chan, Chen, & Lakonishok, 2002;Daniel, Grinblatt, Titman, & Wermers, 1997;Glassman & Riddick, 2006). In the SRI context, this evidence is scarce and, to the best of our knowledge, limited to the studies of Ferruz, Muñoz, and Vargas (2012) and Muñoz, Vicente, and Ferruz (2015) on US funds and Muñoz et al (2014) on green mutual funds. Ferruz et al (2012) show that religious mutual funds underperform conventional funds not only in terms of their stock-picking abilities, but also because they cannot time any investment style, unlike their conventional peers, which show positive ability to time the size and book-to-market styles.…”

Section: Literature Reviewmentioning

confidence: 92%

“…Then, to assess style-timing abilities, we follow Muñoz et al (2014Muñoz et al ( , 2015 and incorporate factors that allow an investigation of timing abilities not only in relation to the market but also in relation to each specific investment style, as shown in the following expression:…”

Section: Selectivity and Style-timing Modelmentioning

confidence: 99%

See 3 more Smart Citations

Performance of European socially responsible funds during market crises: Evidence from France

Leite

Cortez

2015

International Review of Financial Analysis

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Section: Managerial Abilities In Crisis and Non-crisis Periodssupporting

confidence: 59%

Section: Literature Reviewmentioning

confidence: 87%

Section: Literature Reviewmentioning

confidence: 92%

Section: Selectivity and Style-timing Modelmentioning

confidence: 99%

See 2 more Smart Citations

Performance of European socially responsible funds during market crises: Evidence from France

Leite

Cortez

2015

International Review of Financial Analysis

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“…Girard, Rahman, and Stone () find that SR funds in the United States exhibit neutral market timing and negative selectivity skills. Muñoz, Vicente, and Ferruz () find that both U.S. SR and conventional funds show absence of timing abilities. Furthermore, Muñoz, Vargas, and Marco () document unsuccessful timing abilities for both European and U.S. global green funds.…”

Section: Literature Reviewmentioning

confidence: 99%

The performance of socially responsible equity mutual funds: Evidence from Sweden

Leite

Cortez

Silva

et al. 2017

Business Ethics: A Eur Rev

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This paper presents a comprehensive analysis of socially responsible (SR) funds in Sweden by assessing fund managers' abilities and performances across different market states. These issues are analyzed at the aggregate and individual fund levels. The paper also presents several new statistical tests that allow more precise inferences about differences in performance and the variability in fund returns arising from different benchmarks. In general, SR and conventional funds perform similarly to the market. At the aggregate level, SR funds investing in Sweden and Europe perform similarly to conventional funds, while those investing globally tend to underperform. This underperformance seems to be linked with poor selectivity abilities of global SR fund managers. For individual funds, the performance of both types of funds is more similar. Most funds perform similarly in crisis periods compared to non‐crisis periods. Overall, our results are consistent with a mature market for SR investing and support the view that the similar performance of SR and conventional funds is associated with the mainstreaming of SR investment in Sweden. These findings encourage SR investing both by socially conscious investors, who wish to align their social values with their investment decisions, as well as by conventional investors, who will not be penalized by investing in these funds. We also call attention to the difficulties investors face when trying to identify funds with high social standards, considering that there is scarce information on the extent to which each fund (SR or conventional) holds stocks that comply with ethical and social criteria.

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Sustainable disclosure versus ESG intensity: Is there a cross effect between holding and SRI funds?

D’Apice

Ferri

Intonti

2021

Corp Soc Responsibility Env

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Sustainable and Responsible Investment (SRI) funds – the largest component of the fast‐expanding sustainable financial investment industry – apply environmental, social and governance (ESG) analyses to manage their investment portfolios and are particularly demanding in terms of issuers' disclosure. In this paper we take a step forward and ask whether adopting high‐quality sustainability disclosure is important also for SRI funds' holding companies. Specifically, we introduce a novel metrics on the extent of holding companies' sustainability disclosure based on the quality of their Global Reporting Initiative (GRI) reporting. In parallel, we use a standard approach to measure a fund's ESG intensity, that is, the weighted ESG average of a fund's investments. Indeed, we find that an SRI fund's ESG intensity systematically improves when the associated holding company improves its GRI sustainability disclosure. Moreover, we show that this positive effect of holdings' disclosure on a fund's ESG intensity is larger in jurisdictions with less stringent regulation on disclosure, where the signaling value of GRI disclosure is supposedly heightened. Our results do not seem to be driven by endogeneity between a fund's ESG intensity and its holding company's GRI reporting. First, a fund's ESG investment policy and its holding company's sustainability disclosure policy lie on separate decision ladders. Second, we show that the two variables are empirically uncorrelated. Third, our results prove resilient to a battery of robustness checks. The implication of our finding is that holding companies' sustainability disclosure engagement can reap a benefit for their managed SRI funds – provided ESG ratings are reliable –, whose enhanced credibility might prove a key competitive factor.

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Stock-picking and style-timing abilities: a comparative analysis of conventional and socially responsible mutual funds in the US market

Cited by 21 publications

References 34 publications

Performance of European socially responsible funds during market crises: Evidence from France

Performance of European socially responsible funds during market crises: Evidence from France

The performance of socially responsible equity mutual funds: Evidence from Sweden

Sustainable disclosure versus ESG intensity: Is there a cross effect between holding and SRI funds?

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