Yes, Indeed, Idiosyncratic Risk Matters for Socially Responsible Investments!

Loading...
Thumbnail Image
File version
Author(s)
Li, Jane
Cheung, Adrian
Roca, Eduardo
Primary Supervisor
Other Supervisors
Editor(s)
Date
2010
Size

356938 bytes

File type(s)

application/pdf

Location
License
Abstract

We provide empirical evidence regarding the effect of stock market regimes on Social Responsible Investment (SRI). Using the Markov Switching Model, we identify three market regimes for the study period between June 2001 and December 2009 in the US. These regimes are the low, medium, and high volatility states. We find a positive relationship between the idiosyncratic risk (i.e. unsystematic risk) and return during low and medium volatility states. However, this positive relationship tends to disappear during high volatility states. In addition, our analysis suggests that idiosyncratic risk has no forecasting power over SRI future returns. Overall, our findings imply that SRI investors are rewarded for bearing the additional SRI specific risk (idiosyncratic risk) when the market is less volatile. This reward, however, becomes uncertain during periods of high market volatility.

Journal Title

International Research Journal of Finance and Economics

Conference Title
Book Title
Edition
Volume

2010

Issue

54

Thesis Type
Degree Program
School
DOI
Patent number
Funder(s)
Grant identifier(s)
Rights Statement
Rights Statement

© 2010 EuroJournals Publishing, Inc. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.

Item Access Status
Note
Access the data
Related item(s)
Subject

Applied economics

Econometrics

Other economics not elsewhere classified

Banking, finance and investment

Persistent link to this record
Citation
Collections