Does it pay to be ethical? Evidence from the FTSE4Good

Belghitar, Yacine, Clark, Ephraim A. and Deshmukh, Nitin ORCID logoORCID: (2014) Does it pay to be ethical? Evidence from the FTSE4Good. Journal of Banking & Finance, 47 . pp. 54-62. ISSN 0378-4266 [Article] (doi:10.1016/j.jbankfin.2014.06.027)

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The empirical mean-variance evidence comparing the performance of socially responsible investments (SRI) and conventional investments suggests that there is no significant difference between the two. This paper re-examines the problem in the context of Marginal Conditional Stochastic Dominance (MCSD), which can accommodate any return distribution or concave utility function. Our results provide strong evidence that there is a financial price to be paid for socially responsible investing. Indices composed of socially responsible firms are MCSD dominated by trademarked indices composed of conventional firms as well as by indices carefully matched by size and industry with the firms in the SRI indices. Zero cost portfolios created by shorting the SRI index and using the proceeds to invest in the conventional index generate higher average returns, lower variance and higher skewness than either of the two indices standing alone. They also MCSD dominate the SRI and conventional indices standing alone.

Item Type: Article
Keywords (uncontrolled): Socially Responsible Investments, SRI, Marginal Conditional Stochastic Dominance.
Research Areas: A. > Business School > Accounting and Finance
Item ID: 15394
Notes on copyright: Under a Creative Commons license
© 2014 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (
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Depositing User: Nitin Deshmukh
Date Deposited: 28 Apr 2015 09:20
Last Modified: 29 Nov 2022 23:20

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