Recently, the selections of ethical funds are increased; at the same time investors with social and moral preferences have increased in the capital market. There are currently debates on whether ethical funds perform better or worse than funds without ethical criteria. This also involves a vivid discussion on whether investors know about the consequences of investing in ethical funds. Therefore, this study involves theories about the rationality and decision theory, in addition to what mainly control the investment decisions. The study also discusses portfolio theory since this is one of the underlying theories behind fund management and its development.
The purpose of this study is to explain if ethical limitations in the selection of securities affect risk and return in the fund portfolio. This study has positivistic research approach and a quantitative method. The method involves some calculations and equations used that will be presented.
The study indicates that ethical funds actually deliver better risk adjusted returns than its Swedish benchmark index. It also indicates a trend that ethical funds deliver better excess returns than funds without ethical preferences. Furthermore, the study concludes that no statistical difference between the ethical funds and the benchmark in terms of risk in investment can be demonstrated.
One limitation of the study is that the survey mainly includes the Swedish market with Swedish company stakeholders. This means that there may be a need for research in a global market where also cultural aspects need to be considered.
It has not previously been quite clear how ethical fund performance in the Swedish market, and at a time when demand for ethical choice increases, the goal of this study was to clarify the performance of ethical funds.
|Date of Award||2013-Aug-28|
|Supervisor||Emil Numminen (Supervisor) & Elin Smith (Examiner)|
- Degree of Bachelor of Science in Business and Economics
- 15 HE credits
Swedish Standard Keywords
- Economics and Business (502)
- ethical funds
- benchmark indices
- sharpe ratio
- excess yield
- rational theory
- decision theory