Sustainable Mutual Fund Performance and Investment Style: Evidence from Sweden
Sammanfattning: This paper analyzes differences in performance and investment style between the most and least sustainable open-end mutual funds. We investigate Swedish funds using four different factor models, and find no significant difference in risk-adjusted returns (alphas) between funds with high sustainability ratings and those with low ratings for the 2011-2016 period. We do, however, find that high-sustainability funds in our samples are less exposed to market risk than low-sustainability funds are. We also provide evidence that the former group invests relatively more in large-cap stocks than the latter. These findings are robust to the choice of rating provider and sample period. We do not find consistent evidence of significant differences in exposures to value and momentum factors between the two groups. In contrast to the existing literature, our analysis is not based on matched samples and funds' self- reported sustainability assessments. Instead, we use newly released ratings from two independent data providers (Morningstar and MSCI), which renders our sustainability classifications more objective than those used in research to-date.
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