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JOURNAL OF ACCOUNTING AND FINANCE
Do Green Exchange-Traded Funds outperform the S&P500?
Author(s): Omid Sabbaghi
Citation: Omid Sabbaghi, (2011) "Do Green Exchange-Traded Funds outperform the S&P500?" Vol. 11, Iss. 1, pp. 50 - 59
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This study provides an empirical analysis of green index funds. Green exchange-traded funds (ETFs) are new financial instruments that invest in companies exhibiting positive environmental, social, and corporate governance (ESG) characteristics, and provide a low-cost approach to socially responsible investments. In this paper, we provide one of the first investigations of the return dynamics for these financial instruments. Specifically, we construct an equally-weighted portfolio of green ETFs and compare its return performance to that of the S&P500 equity index. Using data at the monthly frequency, we find that our equally-weighted green portfolio outperforms the S&P500 prior to the financial market collapse of 2008. However, consistent
with recent research, we find that these new financial instruments are highly volatile and subsequently underperform the S&P500 in the years following the financial market crash. Our findings suggest that investors proceed with caution when encountering similar green-related financial instruments.
