A volatility-match approach to measure performance : the case of socially responsible exchange traded funds (ETFs)

Purpose: This study examines the risk-adjusted performance of socially responsible exchange traded funds (SR ETFs) in comparison to conventional ETFs. Design/methodology/approach: The main empirical result is based on a risk-adjusted performance metric that does not rely on a linear framework. It measures the difference between the returns of an ETF and the returns of a volatility-match and efficient portfolio. In addition, performance is measured using alpha based on single and multifactor formulations. Findings: Results show that the performance of SRI ETFs is not different from the performance of conventional ETFs. Originality/value: Given the results of the study, socially aware investors can choose to invest in SRI ETFs without sacrificing performance.