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A Study on the Relationship Between a Mutual Fund’s Risk-Adjusted Return and Sustainability: Do Mutual Funds with High Sustainability Scores Outperform Those with Low Ones?
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
2019 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesisAlternative title
En studie på relationen mellan en fonds riskjusterade avkastning och hållbarhetsbetyg : Presterar hållbara fonder bättre? (Swedish)
Abstract [en]

During the past few decades, social responsible investing (SRI) has rapidly grown to become a renowned investment strategy. Because of the contradictory findings on how successful this strategy is in terms of financial return, the aim of this thesis is to compare the performance of sustainable and conventional funds in four different geographical areas during the last three years. With the use of regression analysis, the correlation between the Portfolio Sustainability Score of a fund, which is a Morningstar-provided rating that represents how well a fund incorporates ESG, and its risk-adjusted return is determined.

The final results of this analysis varies among the four geographical regions. The correlation between the two variables is positive in USA and Asia ex-Japan, whereas a negative relationship is found in Europe and the Nordic region. However, the obtained findings are not of statistical significance, implying that there is no difference between the risk-adjusted returns of sustainable versus conventional funds.

Abstract [sv]

Under de senaste årtionden har hållbara investeringar ökat och på senare tid även blivit en väletablerad investeringsstrategi. Då tidigare studier inom området uppvisat motstridiga resultat gällande hur effektiv denna strategi är inom värdeskapande, fokuserar denna rapport på att klargöra ifall hållbara alternativt vanliga fonder är fördelaktiga utifrån ett finansiellt perspektiv. Mer specifikt undersöks fyra geografiska områden över en tidsperiod på tre år. Genom regressionsanalys bestäms korrelationen mellan en fonds Portfolio Sustainability Score, ett betyg som erhålls av Morningstar som representerar hur väl den specifika fonden inkorporerar ESG, och dess riskjusterade avkastning.

De slutgiltiga resultaten av denna analys varierar i de fyra geografiska områdena. I USA och Asien där Japan exkluderas är korrelationen positiv medan en negativ korrelation råder i Europa och Norden. Dock är resultaten inte av statistisk signifikans vilket indikerar att det inte är någon skillnad i den riskjusterade avkastningen mellan hållbara och vanliga fonder.

Place, publisher, year, edition, pages
2019.
Series
TRITA-SCI-GRU ; 2019:145
Keywords [en]
Applied mathematics, regression analysis, sustainability, mutual funds, Morningstar, Sharpe ratio, ESG
Keywords [sv]
Tillämpad matematik, regressionsanalys, hållbarhet, fonder, Morningstar, riskjusterad avkastning, Sharpe ratio, ESG
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:kth:diva-252743OAI: oai:DiVA.org:kth-252743DiVA, id: diva2:1332815
External cooperation
Carnegie Fonder
Subject / course
Applied Mathematics and Industrial Economics
Educational program
Master of Science in Engineering - Industrial Engineering and Management
Supervisors
Examiners
Available from: 2019-06-28 Created: 2019-06-28 Last updated: 2019-06-28Bibliographically approved

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