Comparing SRI funds to conventional funds using a PCA methodology
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2022
Authors
Helliar, C.
Petracci, B.
Tantisantiwong, N.
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Journal of Asset Management, 2022; 23(7):581-595
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In this paper, we investigate characteristic differences between Socially Responsible Investment (SRI) funds and conventionalfunds across 35 different categories, including previously unexplored areas, such as fund manager skills and investmentstrategies. Further, we examine SRI and conventional funds globally rather than from just one country (e.g., US) or oneregion (e.g., Europe), covering funds listed in 22 different countries. We also adopt a new Principal Component Analysis(PCA) methodology for matching SRI funds against their conventional counterparts that significantly increases the samplesize from previous studies, reducing selection bias and possibly explaining contradictory findings in the prior literature.Contributing to the literature, our findings show that: (i) SRI funds have more diversified portfolios than conventional funds;(ii) SRI funds have lower cash holdings while investing more in US equities; and (iii) SRI fund managers charge a smallerfee and are more successful in managing th
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Copyright 2022 The Author(s)