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How SRI Affect Valuation Multiples and Portfolio Management

Andersson, Oskar LU and Andersson, Filip (2013) FEKN90 20131
Department of Business Administration
Abstract
In this paper, we investigate conventional mutual funds’ and socially responsible investment (SRI) funds’ compositions of high and low valuation multiple stocks as well as potential differences in portfolio management between the two types of funds. Previous research has to a large extent focused on risk-adjusted stock returns and has not been able to be conclusive on whether SRI funds under- or outperform conventional mutual funds. We believe that our research can help to understand why previous research not have been conclusive and show that it is important to analyse investment styles when analysing funds’ performance. We analyse the Swedish asset management market during 2008 to 2012 and our dataset consists of 15 conventional mutual... (More)
In this paper, we investigate conventional mutual funds’ and socially responsible investment (SRI) funds’ compositions of high and low valuation multiple stocks as well as potential differences in portfolio management between the two types of funds. Previous research has to a large extent focused on risk-adjusted stock returns and has not been able to be conclusive on whether SRI funds under- or outperform conventional mutual funds. We believe that our research can help to understand why previous research not have been conclusive and show that it is important to analyse investment styles when analysing funds’ performance. We analyse the Swedish asset management market during 2008 to 2012 and our dataset consists of 15 conventional mutual funds and 13 SRI funds. We find significant differences where SRI funds invest in stocks with higher valuation multiples, i.e. less risky stocks, than conventional mutual funds. However, this difference is not explained by differences in valuation of socially responsible stocks but by that the portfolio managers of SRI funds invest differently in comparison to portfolio managers of conventional mutual funds. (Less)
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author
Andersson, Oskar LU and Andersson, Filip
supervisor
organization
course
FEKN90 20131
year
type
H1 - Master's Degree (One Year)
subject
keywords
Socially Responsible Investment (SRI), Valuation Multiples, Portfolio Management, Screening, Ethical Investment
language
English
id
3878757
date added to LUP
2013-06-24 15:55:10
date last changed
2013-06-24 15:55:10
@misc{3878757,
  abstract     = {In this paper, we investigate conventional mutual funds’ and socially responsible investment (SRI) funds’ compositions of high and low valuation multiple stocks as well as potential differences in portfolio management between the two types of funds. Previous research has to a large extent focused on risk-adjusted stock returns and has not been able to be conclusive on whether SRI funds under- or outperform conventional mutual funds. We believe that our research can help to understand why previous research not have been conclusive and show that it is important to analyse investment styles when analysing funds’ performance. We analyse the Swedish asset management market during 2008 to 2012 and our dataset consists of 15 conventional mutual funds and 13 SRI funds. We find significant differences where SRI funds invest in stocks with higher valuation multiples, i.e. less risky stocks, than conventional mutual funds. However, this difference is not explained by differences in valuation of socially responsible stocks but by that the portfolio managers of SRI funds invest differently in comparison to portfolio managers of conventional mutual funds.},
  author       = {Andersson, Oskar and Andersson, Filip},
  keyword      = {Socially Responsible Investment (SRI),Valuation Multiples,Portfolio Management,Screening,Ethical Investment},
  language     = {eng},
  note         = {Student Paper},
  title        = {How SRI Affect Valuation Multiples and Portfolio Management},
  year         = {2013},
}