Bello (2005)

Bello, Zakri. "Socially Responsible Investing and Portfolio Diversification." The Journal of Financial Research. Spring 2005.

Compares the performance of 42 U.S. socially responsible equity mutual funds with a matched sample of 84 non-SRI funds for the January 1994 - March 2001 time period. SRI funds were identified using the Morningstar Principia database. Each SRI fund is matched with two randomly selected U.S. equity funds of approximately equal size.

Although it reviews performance, this study differs from most others in explicitly studying the relationship between social screens and other characteristics such as beta and diversification. The author tests Rudd's (1981) prediction that social screening will introduce a size bias, but finds no evidence of such a bias in this dataset.

Comparing the SRI funds with their non-SRI counterparts using a Wilcoxon two-sample rank-sum test, the author finds that "not a single characteristic of socially responsible mutual funds is significantly different from that of conventional funds." Characteristics reviewed include beta, portfolio concentration, total portfolio holdings, and the size of companies in the portfolio.

Although risk-adjusted performance, as measured by Jensen's alpha, was slightly higher for the SRI funds, this difference was not statistically significant.