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Ethical investing - why not?: An evaluation of financial performance of ethical indexes in comparison to conventional indexes
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
2012 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Problem: Do ethical investments perform better than conventional investments?

Purpose: To evaluate whether Shariah-compliant indexes and/or socially responsible indexes can improve financial performance of an investment portfolio.

Sub-problem: What kind of relationship exists between socially responsible investments and faith-based investments, represented by Shariah-compliant investments?

Sub-purpose: To discover how two types of ethical investments, socially-responsible and Shariah-compliant, are related.

Method: Quantitative study, covering three types of investment styles of four index families during the period from 2000 until 2011. Financial performance evaluation through the Sharpe ratio, Treynor ratio and Jensen’s alpha.

Conclusions: Conventional, socially responsible, and Shariah-compliant indexes do not have any significant differences in financial performance on a global basis. However, Shariah-compliant indexes could slightly over-perform conventional and socially responsible indexes during financial downturns. In the same time socially responsible indexes were noticed to be the most volatile during the whole period of study, to compare with conventional and Shariah-compliant. Regarding relationships, high correlations were found between ethical indexes, as well as between ethical and conventional indexes.

Place, publisher, year, edition, pages
Keyword [en]
ethical investments, socially-responsible investments, Shariah-compliant investments, investment indexes, global indexes, benchmark indexes, financial performance, Sharpe ratio, Treynor ratio, Jensen’s alpha
National Category
Social Sciences
URN: urn:nbn:se:umu:diva-57115OAI: diva2:539947
Educational program
Master's Programme in Finance
Social and Behavioural Science, Law
Available from: 2012-07-06 Created: 2012-07-05 Last updated: 2015-07-03Bibliographically approved

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