Journal of Banking & Finance 29 (2005) 1751–1767 www.elsevier.com/locate/jbf International evidence on ethical mutual fund performance and investment style
Rob Bauer b a,c

, Kees Koedijk

b,*

´
, Roger Otten

c

a
ABP Investments, Schiphol, The Netherlands
Faculteit Bedrijfskunde, Erasmus University Rotterdam and CEPR, P.O. Box 1738,
3000 DR Rotterdam, The Netherlands c Maastricht University, Maastricht, The Netherlands

Received 23 September 2003; accepted 28 June 2004
Available online 23 September 2004

Abstract
Using an international database containing 103 German, UK and US ethical mutual funds we review and extend previous research on ethical mutual fund performance. By applying a
Carhart multi-factor model [Carhart, Journal of Finance 57 (1997) 57] we overcome the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find no evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990–2001 period. Our results also suggest that ethical mutual funds underwent a catching up phase, before delivering financial returns similar to those of conventional mutual funds. Finally, our performance estimates are robust to the inclusion of ethical indexes, which, surprisingly, are not incrementally capable of explaining ethical mutual fund return variation.
Ó 2004 Elsevier B.V. All rights reserved.
JEL classification: G12; G20; G23
Keywords: Mutual funds; Performance evaluation; Style analysis; Ethical investments

*

Corresponding author. Tel.: +31 10 408 2790; fax: +31 10 408 9017.
E-mail address: c.koedijk@fbk.eur.nl (K. Koedijk).

0378-4266/$ - see front matter Ó 2004 Elsevier B.V. All rights reserved. doi:10.1016/j.jbankfin.2004.06.035 1752

R. Bauer et al. / Journal of Banking & Finance 29 (2005) 1751–1767

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