Social Preferences and Portfolio Choice
73 Pages Posted: 2 Oct 2013 Last revised: 18 Nov 2021
Date Written: July 1, 2017
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.
Keywords: portfolio choice, social preferences, socially responsible investments, mutual funds, administrative investor data, experiment, survey
JEL Classification: G110, D640, C900
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