A tale of values-driven and profit-seeking social investors

J. Derwall, K. Koedijk, J. Ter Horst

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The segmentation of the socially responsible investing (SRI) movement with a values-versus-profit orientation solves the puzzling evidence that both socially responsible and controversial stocks produce superior returns. We derive that the segment of values-driven investors primarily uses " negative" screens to avoid controversial stocks, while the profit-driven segment uses " positive" screens. As the result of an empirical analysis over the period 1992-2008, we base our segmentation on investment screens that help us to examine whether values affect prices. We find that, although the profit-driven segment earns abnormal returns in the short run, these profit-generating opportunities do not persist in the long run for SRI stocks. However, our conclusions highlight the observation that different views on SRI can be complementary in the short run. © 2011 Elsevier B.V.
Original languageEnglish
Pages (from-to)2137-2147
JournalJournal of Banking and Finance
Volume35
Issue number8
DOIs
Publication statusPublished - Aug 2011
Externally publishedYes

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