Asymmetric Impact of Active Management on the Performance of ESG Funds
Abstract
:1. Introduction
2. Literature Review and Theoretical Framework
2.1. Literature Review
2.2. Theoretical Framework
3. Data and Methodology
3.1. Sample
3.2. Methodology and Definition of Variables
3.3. Summary Statistics
4. Results
5. Additional Tests
5.1. Relationship between Active Management and Fund Performance: Alternate Estimation Strategies
5.2. The Link between Active Management and Fund Performance: The Impact of Fund Characteristics
6. Conclusions
Author Contributions
Funding
Data Availability Statement
Acknowledgments
Conflicts of Interest
Appendix A
Variables | Definition | References |
---|---|---|
ALPHA | The performance of funds is captured by the Alpha of the Fama–French three factors model. | |
DOWNASYNCH | This measure captures the proportion of times when both the fund returns and the market returns are jointly negative. We multiply this proportion by −1 to make higher values of this variable correspond to greater levels of fund’s active management. | Authors’ estimates |
UPASYNCH | Authors’ estimates | |
This measure captures the proportion of times when both the fund returns and the market returns are jointly positive. We multiply this proportion by −1 to make higher values of this variable correspond to greater levels of fund’s active management. | ||
TOTALSYNCH | This measure is the sum of downside and upside asynchronicity estimates. It is measured as the proportion of times when the fund returns and the market returns are jointly either positive or negative. Multiplying this variable by −1 corresponds to more active management irrespective of market advances or declines. | Authors’ estimates |
EXPENSE | The percentage of the total investment that is allocated to fund operating expenses by shareholders over the quarter. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
FLOW | Net percentage change in total net assets. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
SIZE | Log of fund’s total net assets, expressed in millions of USD. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
AGE | Log of the number of years since the inception of fund. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
TURNOVER | Minimum of aggregate purchases or sales of securities over the calendar year divided by the average total net assets. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
YDUM | Set of year dummies. | Ferreira et al. (2013); El Ghoul and Karoui (2022) |
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Variables | 25th Percentile | Mean | Median | 75th Percentile | Standard Deviation | Observations. |
---|---|---|---|---|---|---|
DOWNASYNCH | −0.2602 | −0.2095 | −0.2383 | −0.1726 | 0.0736 | 6252 |
UPASYNCH | −0.3268 | −0.2700 | −0.3041 | −0.2434 | 0.0834 | 6252 |
EXPENSE | 0.0065 | 0.0102 | 0.0095 | 0.0125 | 0.0050 | 6252 |
FLOW | −0.0217 | 0.0544 | 0.0332 | 0.0964 | 0.2142 | 6252 |
SIZE | 3.1441 | 4.3601 | 4.5239 | 5.5789 | 1.8652 | 6252 |
AGE | 1.7351 | 2.2363 | 2.3969 | 2.9085 | 0.8949 | 6252 |
TURNOVER | 0.2100 | 0.6955 | 0.3900 | 0.8500 | 0.8485 | 6252 |
No. | Variables | 1 | 2 | 3 | 4 | 5 | 6 | 7 | VIF |
---|---|---|---|---|---|---|---|---|---|
1 | DOWNASYNCH | 1.0000 | 4.56 | ||||||
2 | UPASYNCH | 0.8771 *** | 1.0000 | 4.52 | |||||
3 | EXPENSE | −0.1078 *** | −0.0853 *** | 1.0000 | 1.32 | ||||
4 | FLOW | 0.0382 *** | −0.0287 ** | −0.0607 *** | 1.0000 | 1.16 | |||
5 | SIZE | −0.0093 | −0.0201 | −0.3666 *** | −0.1408 *** | 1.0000 | 1.85 | ||
6 | AGE | −0.0885 *** | −0.0935 *** | 0.0688 *** | −0.3388 *** | 0.5430 *** | 1.0000 | 1.77 | |
7 | TURNOVER | 0.5047 *** | 0.4965 *** | −0.0113 | 0.0219 * | −0.0064 | −0.0425 *** | 1.0000 | 1.37 |
Variables | Model (1) | Model (2) | Model (3) | Model (4) |
---|---|---|---|---|
UPASYNCH | −0.0003 | −0.0123 *** | ||
(−0.8666) | (−18.2741) | |||
DOWNASYNCH | 0.0027 *** | 0.0155 *** | ||
(7.9062) | (19.7471) | |||
TOTALSYNCH | 0.0005 *** | |||
(3.3036) | ||||
AGE | 0.0001 * | 0.0001 ** | 0.0001 ** | 0.0001 ** |
(1.8070) | (2.5450) | (2.0431) | (2.1695) | |
EXPENSE | −0.0014 | 0.0013 | 0.0012 | −0.0001 |
(−0.3387) | (0.3259) | (0.2911) | (−0.0338) | |
TURNOVER | 0.0001 *** | −0.0001 ** | −0.0001 | 0.0001 |
(3.7338) | (−2.2764) | (−0.7178) | (0.8624) | |
FLOW | 0.0012 *** | 0.0012 *** | 0.0010 *** | 0.0012 *** |
(8.2044) | (8.3078) | (7.4667) | (8.2915) | |
SIZE | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
(1.4196) | (1.4289) | (1.5478) | (1.4176) | |
Year Dummies | Yes | Yes | Yes | Yes |
Observations | 6252 | 6252 | 6252 | 6252 |
R-Squared | 0.7842 | 0.7867 | 0.8001 | 0.7846 |
F-Values | 2273.60 *** | 2408.78 *** | 3666.45 *** | 2287.44 *** |
Variables | Model (1) | Model (2) | Model (3) | Model (4) | Model (5) |
---|---|---|---|---|---|
UPASYNCH | −0.0123 *** | −0.0024 ** | −0.0138 *** | −0.0048 *** | −0.0089 *** |
(−15.7187) | (−2.6555) | (−15.3459) | (−10.4256) | (−16.6087) | |
DOWNASYNCH | 0.0155 *** | 0.0039 *** | 0.0172 *** | 0.0065 *** | 0.0111 *** |
(17.6616) | (3.6708) | (19.8129) | (12.9747) | (17.103) | |
ALPHA (Lagged) | 0.5274 *** | ||||
(25.0537) | |||||
AGE | 0.0001 ** | 0.0001 | 0.0001 | 0.0001 | 0.0001 ** |
(2.4881) | (1.2988) | (1.2163) | (0.3886) | (2.4205) | |
EXPENSE | 0.0012 | −0.0047 | 0.0092 | −0.0059 * | 0.0017 |
(0.4114) | (−1.1174) | (0.8658) | (−1.8884) | (0.4473) | |
TURNOVER | −0.0001 | −0.0001 | −0.0001 | 0.0001 | −0.0001 |
(−0.6946) | (−0.7050) | (−0.3721) | (0.0682) | (−1.0813) | |
FLOW | 0.0010 *** | 0.0002 ** | 0.0010 *** | −0.0001 | 0.0010 *** |
(6.4671) | (2.1131) | (6.3358) | (−1.2846) | (7.5861) | |
SIZE | 0.0001 ** | 0.0001 | 0.0001 * | −0.0001 | 0.0001 |
(2.4634) | (−1.0118) | (1.9388) | (−0.4656) | (0.8974) | |
Year Dummies | Yes | No | Yes | Yes | Yes |
Observations | 6252 | 6252 | 6252 | 6098 | 6098 |
R-Squared | 0.8001 | 0.2191 | 0.7973 | 0.9107 | 0.8575 |
Variables | Model (1) | Model (2) | Model (3) | Model (4) | Model (5) |
---|---|---|---|---|---|
UPASYNCH | −0.0055 *** | −0.0132 *** | −0.0150 *** | −0.0123 *** | −0.0096 *** |
(−3.9717) | (−9.6961) | (−17.8764) | (−17.1522) | (−6.1184) | |
DOWNASYNCH | 0.0072 *** | 0.0171 *** | 0.0182 *** | 0.0158 *** | 0.0119 *** |
(4.3598) | (10.493) | (18.2534) | (19.4492) | (6.6752) | |
AGE*UPASYNCH | −0.0031 *** | ||||
(−5.2540) | |||||
AGE*DOWNASYNCH | 0.0038 *** | ||||
(5.4473) | |||||
EXPENSE*UPASYNCH | 0.0759 | ||||
(0.6377) | |||||
EXPENSE*DOWNASYNCH | −0.1530 | ||||
(−1.1284) | |||||
TURNOVER*UPASYNCH | 0.0035 *** | ||||
(5.9397) | |||||
TURNOVER*DOWNASYNCH | −0.0034 *** | ||||
(−4.5647) | |||||
FLOW*UPASYNCH | −0.0013 | ||||
(−0.3372) | |||||
FLOW*DOWNASYNCH | −0.0061 | ||||
(−1.2322) | |||||
SIZE*UPASYNCH | −0.0007 ** | ||||
(−2.0098) | |||||
SIZE*DOWNASYNCH | 0.0009 ** | ||||
(2.2567) | |||||
AGE | 0.0001 | 0.0001 ** | 0.0001 | 0.0001 ** | 0.0001 ** |
(0.1277) | (2.0596) | (1.5427) | (2.1250) | (2.0549) | |
EXPENSE | 0.0025 | −0.0112 | 0.0029 | 0.0012 | 0.0013 |
(0.6349) | (−0.7411) | (0.6964) | (0.2949) | (0.3287) | |
TURNOVER | 0.0001 | 0.0001 | 0.0002 *** | 0.0001 | 0.0001 |
(0.0174) | (−0.8087) | (3.3648) | (−0.4968) | (−0.6685) | |
FLOW | 0.0010 *** | 0.0010 *** | 0.0010 *** | −0.0005 ** | 0.0010 *** |
(7.4092) | (7.4218) | (7.4536) | (−2.4539) | (7.5286) | |
SIZE | 0.0001 * | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
(1.7870) | (1.4877) | (1.4943) | (1.5204) | (0.6520) | |
Year Dummies | Yes | Yes | Yes | Yes | Yes |
Observations | 6252 | 6252 | 6252 | 6252 | 6252 |
R-Squared | 0.8016 | 0.8002 | 0.8012 | 0.802 | 0.8004 |
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Abou Tanos, B.; Farooq, O.; Bouaddi, M.; Ahmed, N. Asymmetric Impact of Active Management on the Performance of ESG Funds. J. Risk Financial Manag. 2024, 17, 383. https://doi.org/10.3390/jrfm17090383
Abou Tanos B, Farooq O, Bouaddi M, Ahmed N. Asymmetric Impact of Active Management on the Performance of ESG Funds. Journal of Risk and Financial Management. 2024; 17(9):383. https://doi.org/10.3390/jrfm17090383
Chicago/Turabian StyleAbou Tanos, Barbara, Omar Farooq, Mohammed Bouaddi, and Neveen Ahmed. 2024. "Asymmetric Impact of Active Management on the Performance of ESG Funds" Journal of Risk and Financial Management 17, no. 9: 383. https://doi.org/10.3390/jrfm17090383