Performance Evaluation of European Green Mutual Funds - Is There an Economic Trade-Off?

Abstract

In this thesis, we investigate the financial performance of European green and conventional mutual equity funds over the 2007 – 2017 period. We applied the Carhart (1997) four-factor model over three different periods, and find evidence that the risk-adjusted alphas are not statistically different. Furthermore, we computed two-sided t-test with Sharpe ratios adjusted for asymmetrical return distributions and find that the results are consistent. In respect to green funds’ investment styles, we find that the funds in our sample are less exposed to small market capitalisation, potentially uncovering different investment styles for various green fund classes. Lastly, we find that there is no statistical difference regarding investment styles for the book-to-market and momentum factors.