MARKET TIMING ABILITY OF SOCIALLY RESPONSIBLE INVESTING FUNDS IN LUXEMBOURG
MARKET TIMING ABILITY OF SOCIALLY RESPONSIBLE INVESTING FUNDS IN LUXEMBOURG

Author(s): Wei Rong Ang, Hooi Hooi Lean
Subject(s): Economy, Business Economy / Management, Business Ethics
Published by: ASERS Publishing
Keywords: Luxembourg, SRI funds; performance measurement; market timing
Summary/Abstract: Socially Responsible Investing (SRI) funds are funds that undergo screening processes which satisfies the environmental, social and governance criterion for the benefit of all. This chapter investigates the market timing ability of SRI funds in Luxembourg. Luxembourg is the largest fund investment center in Europe and played an important role in promoting SRI funds. This study uses data from Eurekahedge database for 188 SRI funds in Luxembourg for the sample period of January 2001 to December 2011. We employ two market timing models, i.e. the four-factor Treynor-Mazuy (1966) model and Henriksson-Merton (1981) model for the analysis. We find that the SRI fund managers in Luxembourg are skillful. In other words, they are good in forecasting the market trends. Moreover, there is no size and momentum effects found but value effect is existed. We also find that the SRI funds have higher return during the financial crisis. Hence, we suggest that the SRI funds can be used as a hedging instrument during the crisis.

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