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Screening techniques, sustainability and risk adjusted returns.: - A quantitative study on the Swedish equity funds market
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
2017 (English)Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Previous studies have primarily compared the performance of sustainable equity funds

and non-sustainable equity funds. A meta-analysis over 85 different studies in the field

concludes that there is no statistically significant difference in risk-adjusted returns

when comparing sustainable funds and non-sustainable funds. This study is thus an

extension on previous studies where the authors have chosen to test the two most

common sustainability screening techniques to test if there is a difference within the

sustainability field of equity funds.

In this study, we compare the performance of the two primary screening techniques

used with regards to sustainability within the equity fund industry: the exclusionary

Negative Screening and the Mixed Method Screening (Negative screen followed by an

additional positive screen). The tests were conducted on both Swedish equity funds as

well as Global equity funds, where both groups had to be eligible to be marketed in

Sweden according to Swedish law. What the study found when comparing the two types

of screening techniques was that over a five-year period, equity funds using a Mixed

Method screen had a significantly lower risk adjusted return compared to the Negative

Screen group. The study also showed differences between Global equity funds and

Swedish equity funds, where Global equity funds were the category that did not produce

significantly different risk adjusted returns when screened for sustainability criteria’s.

The findings put forward in this study indicate that the Modern Portfolio Theory and its

joining theory of the Efficient Frontier are applicable to the sustainability-screening

context. The Good Management theory is also tested with regards to a company’s CSR

work and risk-adjusted returns. The Good Management theory does however not find

any support in our results. CAPM is also tested in the context of sustainability

screening, and the results found regarding the CAPM’s ability to explain different

returns are not as clear-cut as the rest of the results.

Our overall conclusion from this study is that Negative Screening produces better

financial results compared to Mixed Method screening with regards to sustainability,

but more importantly we have come to realize that the transparency within the mutual

funds market must be enhanced with regards to sustainability in order for future studies

to deliver a more in-depth analysis of the causes that drives the different returns.

Place, publisher, year, edition, pages
2017. , 66 p.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:umu:diva-137341OAI: oai:DiVA.org:umu-137341DiVA: diva2:1118095
Educational program
Study Programme in Business Administration and Economics
Supervisors
Examiners
Available from: 2017-06-30 Created: 2017-06-29 Last updated: 2017-06-30Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf