The effect of screening intensity on socially responsible funds

Ahn, Jason Young Kyun. (2007). The effect of screening intensity on socially responsible funds Honours Thesis, School of Business, The University of Queensland.

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Author Ahn, Jason Young Kyun.
Thesis Title The effect of screening intensity on socially responsible funds
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2007
Thesis type Honours Thesis
Total pages 97
Language eng
Subjects 1503 Business and Management
Formatted abstract
Upon recent corporate scandals in the U.S. and increasing interests in environmental, social and health issues, companies are increasingly put in the onerous position as the society and investors expect more than just a good profit. To date, Socially Responsible Investment (SRI) fund research has been only interested in the difference in return between the SRI funds and the conventional funds. This research focus on the variation of number and types of screening criteria between SRI funds to analyse risk and performance of SRI funds. Result of the study show that there are curvilinear relationship between screening intensity and Jensen's alpha risk adjusted performance measure of the fund which in1plies both SRI funds with a low and high number of screening criteria are found to perform better than SRI funds with a medium number of screening criteria. Analysis of idiosyncratic risk of the fund reveals that the idiosyncratic (unsystematic) risk of the SRI funds increases as screening intensity increases. However, the marginal (additional) idiosyncratic risk of SRI funds decreases as SRI funds apply more screening criteria. An analysis of SRI fund performance using the Sharpe ratio suggests that screening intensity is insignificant with regards to the total risk-adjusted performance of SRI funds. Furthermore, SRI funds which apply tobacco, employment equality or labour relations screening criteria were found to suffer economically on a risk-adjusted basis. However, environmental screening criterion shows no significant implications for performance. Regression results using a SRI equity funds sample provide much stronger evidences supporting original results. However, Weighted Least Squares regression method applied in Chan and Faff (2003) provides statistically insignificant results for some of the hypotheses which imply that original results using OLS might be driven by insignificant alpha obtained from performance risk-adjusting process.

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Created: Tue, 16 Nov 2010, 12:58:17 EST by Muhammad Noman Ali on behalf of The University of Queensland Library