Jennings and Martin (2007)
Jennings, William W. and Gregory W. Martin. "Socially Enhanced Indexing: Applying Enhanced Indexing Techniques to Socially Responsible Investment." Journal of Investing, Summer 2007.
Reviews the impact of conservative Christian social screens on portfolio risk (as measured by tracking error) using the BARRA Aegis (August 2002) fundamental factor model.
This paper is very readable and makes important contributions on at least three levels:
1) It demonstrates how modern quantitative portfolio management tools may be used to manage the tracking error created by social screens.
2) It examines and quantifies the impact on risk (as measured by tracking error) of a set of conservative Christian screens, both individually and as a group. These include: Alcohol, Tobacco, Gambling, Pornography, Same Sex Benefits, and Life Partner Benefits.
3) It quantifies the tracking error of 9 SRI mutual funds, and demonstrates that it may be too high for many social investors.
This is an excellent resource for clients and practitioners who need a clear explanation of how risk management tools can aid social investors, as well as for conservative Christian investors, whose screens have been little-studied to this point.