Who Knocks on the Door of Portfolio Performance Heaven: Sinner or Saint Investors?

Abstract

To sin, or not to sin: that has been the question for many people for a long time, and nowadays that question has moved to the financial markets. The existence of studies that show that investing in vice sectors such as the alcohol, tobacco, and gambling industries, collectively known as the “triumvirate of Sin”, is profitable has created some uncertainty for investors who wonder whether or not to be socially responsible. We show that by implementing an investment strategy based on the Fama–French five-factor model, “saint” investors obtain better portfolio performance, even when transaction costs are taken into consideration, and therefore they are the ones chosen to knock on the door of portfolio performance heaven.

Did ESG portfolio augment investors’ wealth during Covid19? Evidence from Indian stock market

“…Nonetheless, various empirical studies comparing ESG and non-ESG portfolio performance have yielded contradictory results. An increasing number of studies (Cesarone et al , 2022; Beloskar and Rao, 2022; Badía et al , 2021; Bermejo Climent et al , 2021; Yook and Hooke, 2020; Miralles-Quirós and Miralles-Quirós, 2020; Wu et al , 2017; Tripathi and Bhandari, 2015; Kempf and Osthoff, 2007; Derwall et al , 2005; Statman, 2005) have found that ESG portfolios engendered superior performance compared with non-ESG portfolios. On the contrary, several research studies (Milonas et al , 2022; Torre et al , 2020; Hartzmark and Sussman, 2019; Ur Rehman et al , 2016; Ortas et al , 2014; Guenster, 2012; Young and Proffitt, 2003; Hamilton et al , 1993) have concluded that ESG portfolios either underperform non-ESG portfolios or there is no statistically significant difference between the two.…”

“…Hartzmark and Sussman (2019) find no evidence that high-sustainability funds outperform low-sustainability funds. When compared to the initial stock–bond portfolio, Miralles-Quirós and Miralles-Quirós (2020) discovered that investment in exchange traded funds (ETFs) that contribute to the SDGs can result in substantial gains in portfolio performance. The fossil-free portfolio lagged the traditional stock portfolio in the early years, but this trend reversed in the subsequent years (Yook and Hooke, 2020).…”

Shades between Black and Green Investment: Balance or Imbalance?

“…Meanwhile, sustainable investment is a broad concept that covers other more specific types of investment such as the so-called impact investment, that combines financial objectives with social ones (labour and human rights, among others). Nevertheless, we have to highlight so-called green investment, which considers environmental objectives (environmental policies, external/internal management systems, climate change indicators, emissions, solid waste, water, among others) in addition to financial ones [12]. This type of investment has attracted the attention not only of investors but also of all stock market participants.…”