Social Preferences and Portfolio Choice

Citation data:

SSRN Electronic Journal

Publication Year:
2017
Usage 6437
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SSRN
SSRN
SSRN Id:
2318987; 2354905
DOI:
10.2139/ssrn.2354905; 10.2139/ssrn.2318987
Author(s):
Riedl, Arno ; Smeets, Paul
Publisher(s):
Elsevier BV
Tags:
experimental finance; social preferences; socially responsible investments; mutual funds
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article description
To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.