THE PERFORMANCE OF SOCIALLY RESPONSIBLE MUTUAL FUNDS

This study examines the performance of socially responsible mutual funds from 1999 to 2009. To minimize the benchmark error, we apply propensity-score-matching method to identify a most comparable conventional fund for every socially responsible fund based on several key fund characteristics. We find that return of socially responsible mutual funds are lower than conventional funds before applying the propensity-score-matching method. However, comparing to the propensity-score-matched funds, socially responsible mutual funds have a superior return on both average and risk-adjust returns. Further analysis shows that the superior return of socially responsible funds over propensity-score-matched funds only exists in the funds satisfying social and governance screening criteria.

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