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Market-timing skills of socially responsible investment fund managers: The case of North America versus Europe

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Abstract

This study analyzes the market-timing skills of Socially Responsible Investment (SRI) fund managers based in North America (US & Canada) and Europe. We use a broad sample of 248 North American and 500 European SRI funds during the January 2001-December 2011 period. Our result indicates that market-timing skills exist in both regions and SRI funds are attractive investment instruments. Nonetheless, North American SRI funds are more attractive than the European SRI funds because fund managers from North America possess superior stock selection abilities and market-timing skills.

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Notes

  1. Conventional funds do not go through a stringent screening process during portfolio formation.

  2. Religious funds are formed based on moral belief or religious teachings that normally exclude the so-called ‘sin’ stock during the screening process. For example, companies in the tobacco, alcohol and gambling industries.

  3. Conservative funds indicate that the fund return’s fluctuation is less than the market return (that is, the fund’s β is less than one).

  4. The other category represents Austria, Belgium, British Virgin Island, Cayman Island, Denmark, Germany, Guernsey, Ireland, Isle of Man, Italy, Liechtenstein, Netherlands, Spain, Sweden and Switzerland.

  5. Money market funds, certificates of deposit and other short-term obligations.

  6. Not balanced fund, which invest in both equity and fixed income products.

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Acknowledgements

The authors thank Style Research Ltd for providing free access to the data of SMB, HML and MOM. The first author would like to acknowledge the USM fellowship and PRGS grant 1001/PSOSIAL/836029.

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Authors and Affiliations

  1. Department of Finance, State University of New York (Plattsburgh), State University of New York (Plattsburgh), 101 Broad Street, Plattsburgh, 12901, NY, USA

    Greg N Gregoriou & Hooi Hooi Lean

Authors
  1. Wei Rong Ang
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  2. Greg N Gregoriou
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  3. Hooi Hooi Lean
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11graduated with a Master of Social Sciences in Economics from Universiti Sains Malaysia. His research focuses on Socially Responsible Investment Funds under the supervision of Dr Hooi Hooi Lean. He has published three book chapters on the performance of Socially Responsible Investment Funds across various regions. His main research interests relate to mutual funds and Socially Responsible Investment Funds. He won the best research award Anugerah Persada Kencana for Master’s Pure Art category in 2012 from Universiti Sains Malaysia.

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Ang, W., Gregoriou, G. & Lean, H. Market-timing skills of socially responsible investment fund managers: The case of North America versus Europe. J Asset Manag 15, 366–377 (2014). https://doi.org/10.1057/jam.2014.34

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