The flow-performance relationship of ethical mutual funds: international evidence

• Autor(a) principal: Sahgül, Mahmut
• Data de Publicação: 2017
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/16645
• topic: Mutual funds; Flow-performance relationship; Convexity; Ethical funds; Investor sophistication; Social responsibility; Fundos de investimento; Mercado financeiro; Fluxos monetários; Relação fluxo-performance; Convexidade; Fundos éticos; Sofisticação do investidor

In this dissertation we use a worldwide sample, including twelve countries, to study whether ethical funds with diverse characteristics have an influence on the flow-performance relationship. In our analysis, we start by looking at whether ethical and non-ethical funds have different sensitivities to four-factor alpha. Main findings suggest that the relationship of fund flows, and performance is convex, confirming former research using an international sample. The results indicate that ethical fund investors are less sophisticated investors. Main findings suggest that flows into ethical funds are significantly lower than flows into non-ethical funds. Fund performance is not the leading criteria for investments in ethical funds. Moreover, results show that ethical funds have lower raw returns and four-factor alpha than non-ethical funds. Since investors in ethical funds derive different non-monetary benefits from their investments, they are willing to give off additional return to satisfy their needs. Because ethical fund investors are motivated by other incentives and care less about performance they react less to four-factor alpha. We also see that ethical fund investors react less to bottom and more to top performers, behaving more like unsophisticated investors (Ferreira, et al. 2012). Finally, when we split our sample into different categories of ethical funds, we find different reactions to past performance, and that the flow-performance relationship is even negative for social, opportunity and ecological funds.