An ongoing debate in the economic literature is if portfolios of companies with a high CSR rating outperform conventional portfolios. An argument for why this should be the case is that companies with high CSR rating are companies that provide quality products, i.e. CRS is seen as a signal of a firmÂ¿s trustworthiness in providing quality products (see e.g. Managi et al (2012) and references in here). Another argument in favor of SRI investing is that employees of socially responsible companies perform better than their peers in less social responsible companies, making investors more willing to invest in CSR portfolios (see e.g. Sun, Yun, 2015). Hence, in the long run, portfolios based on companies with high CSR rating are expected to outperform conventional portfolios. On the other hand, imposing CSR-screening restrict the investment universe, and hence one would expect conventional portfolios to outperform portfolios with companies with high CSR ratings. Using the latest screening standards for CSR we want to investigate if we can design a portfolio that outperforms a conventional portfolio. That is, can an investor make moral correct investments and still make money? Secondly, we want to test if an investor, on the other hand, can make immoral investments and make even more money on that. The latter is based on the paper by Hong and Kacperczyk (2009) who shows that sin stocks (i.e. publicly traded companies involved in producing alcohol, tobacco, and gaming) outperforms their comparables. Thus, our overall research question is whether it pays out the most to be a moral or an immoral investor.
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