1992–2002 period.^13 A benefit to the investor is the product strength vari-
able, which is positively associated with returns and reflects R&D leader-
ship of the firm. Firms that engage in R&D can be recognized as being
good socially responsible firms.^14 If one eliminates securities of companies
that spend less than the median firm on R&D during the 1982–1996 pe-
riod, the IC of the composite model rises from 0.093 to 0.117. Moreover,
if one uses R&D as a quadratic term, as we did in Chapter 9, one adds
more than 240 basis points of excess returns to mean-variance efficient
portfolios. R&D adds value to stockholders in socially screened and un-
screened universes.
Summary and Conclusions
The purpose of this study has been to show that there has been no statisti-
cally significant difference between the average returns of a socially
screened and an unscreened universe during the 1987–1996 period and the
1983–1998 period. Socially conscious investing need not be a dumb idea,
but one should be attentive when selecting a socially screened mutual fund,
as manager performance can vary dramatically.