The Financial Performance of Socially Responsible Investments: Insights from the Intertemporal CAPM

Yuchao Xiao, Robert Faff, Philip Gharghori, Byoung-Kyu Min

Journal of Business Ethics · 2017 · Volume 146 · Issue 2

Abstract

This study formulates a two-factor empirical model under the intertemporal CAPM framework to evaluate the cross-sectional implications of socially responsible investments in the US equity market. Our results show that socially responsible investments have no asset pricing impact on the US market. We argue that this ‘no financial impact’ finding indicates that investors will not be disadvantaged financially by investing in socially responsible funds or corporations.

Keywords

Socially responsible investments, Intertemporal CAPM, Asset pricing, Economic tracking portfolios

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