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Journal of Asset Management

, Volume 19, Issue 3, pp 179–190 | Cite as

Psychic dividends of socially responsible investment portfolios

  • Andrew Ainsworth
  • Adam Corbett
  • Steve Satchell
Original Article
  • 59 Downloads

Abstract

We provide a measure for the value of the non-financial satisfaction that accrues to individuals from investing in a socially responsible manner. This non-financial benefit is referred to as the ‘psychic dividend’ of socially responsible investing (SRI). Using constant relative risk aversion and loss aversion utility functions, we estimate that investors only need to earn a non-financial benefit of two to six basis points per month for them to be indifferent between investing in SRI and non-SRI portfolios. The estimates are similar in both the USA and the UK. The findings show that more investors are likely to benefit from investing in SRI given the decline in the lower bound on the psychic dividend that we observe over time.

Keywords

Socially responsible investment Psychic dividends Portfolio performance 

Notes

Acknowledgements

We would like to thank Karen Benson, Robert Durand, Terry Walter and seminar participants at the University of Sydney for helpful feedback.

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Copyright information

© Macmillan Publishers Ltd., part of Springer Nature 2018

Authors and Affiliations

  • Andrew Ainsworth
    • 1
  • Adam Corbett
    • 1
  • Steve Satchell
    • 1
    • 2
  1. 1.Finance DisciplineUniversity of SydneySydneyAustralia
  2. 2.Trinity CollegeUniversity of CambridgeCambridgeUK

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