Off-campus UMass Amherst users: To download dissertations, please use the following link to log into our proxy server with your UMass Amherst user name and password.

Non-UMass Amherst users, please click the view more button below to purchase a copy of this dissertation from Proquest.

(Some titles may also be available free of charge in our Open Access Dissertation Collection, so please check there first.)

Three essays on socially responsible investing: A summary look, eco -efficiency and measuring opportunity cost

Aixin Ma, University of Massachusetts Amherst


Over the study period of 1995 to 2006, performance disparities are reported between mutual funds engaged in socially responsible investing (SRI funds) and non-SRI funds. After introducing a social factor and firm specific risk variables, an extension to the Fama-French-Carhart four-factor model seems able to capture all the cross-sectional variations in returns. The hypothesis that social investing incurs a risk that is priced therefore cannot be rejected for the sample of this study. The first essay also briefly discusses why the recent surge in oil prices cannot fully explain the performance differentials between SRI funds and non-SRI funds. The second essay explores the relationship between environmental and financial performance. It focuses on the question: Does social screening based on environmental sustainability constitute a winning strategy for socially responsible mutual funds? Using the Business Ethics Magazine's Best 100 Corporate Citizens ranking, the study analyzes market returns of the 20 firms on the list with the highest environment scores (the "greenest" group) and those of a control group made up of their closest industry competitors. The "greenest" group underperformed the CRSP market portfolio in excess standard deviation adjusted returns (ESDAR). On the other hand, the control group outperformed the market portfolio in both raw returns and ESDAR. A study of six actual "green funds" indicates that on average these funds did better than the arbitrary "green" portfolios over the study period on a after-fee basis. The third essay explores the measuring of the opportunity cost associated with social screening from a unique angle—by how much the performance ceiling is lowered when a group of stocks of varying characteristics are excluded from the investment pool. Three new measures, the Sharpe-ratio Reduction Cost (SRC), the Opportunity Cost (OC), and the Opportunity Maximization Skill (OMS), are developed to assist in exploring this matter. I conclude that the hypothesis "social screening does involve measurable opportunity cost" cannot be rejected. On the other hand, managers for SRI funds and non-SRI funds do not seem to differ significantly in their ability to reach their performance ceilings.

Subject Area

Business administration|Finance

Recommended Citation

Ma, Aixin, "Three essays on socially responsible investing: A summary look, eco -efficiency and measuring opportunity cost" (2008). Doctoral Dissertations Available from Proquest. AAI3336964.