Table 4 Performance of sector funds...

Table 4

Performance of sector funds versus sector ETFs for the period 2015–2023

Panel A: Full Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.303	<0.0001	−0.133	−0.021	0.136	−0.008	<0.0001	<0.0001
Consumer Cyclical	−0.271	<0.0001	−0.132	−0.037	<0.0001	−0.018	<0.0001	<0.0001
Domestic Energy	−0.268	<0.0001	−0.072	0.246	<0.0001	0.023	<0.0001	<0.0001
Domestic Financial	−0.065	0.110	−0.025	0.046	<0.0001	0.027	0.008	0.001
Domestic Real Estate	−0.370	<0.0001	−0.121	−0.330	<0.0001	−0.107	0.001	0.000
Health Care	−0.092	<0.0001	−0.041	−0.135	<0.0001	−0.062	0.084	0.007
Industrials	−0.312	<0.0001	−0.147	−0.174	<0.0001	−0.093	0.010	0.031
Materials	−0.254	<0.0001	−0.107	−0.331	<0.0001	−0.140	0.189	0.017
Technology	0.281	<0.0001	0.130	0.472	<0.0001	0.266	<0.0001	<0.0001
Utilities	−0.272	<0.0001	−0.098	−0.150	<0.0001	−0.042	<0.0001	<0.0001
Total Funds/SPY	−0.151	<0.0001	−0.047	−0.007	<0.0001	−0.032	<0.0001	0.001

Panel A: Full Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.303	<0.0001	−0.133	−0.021	0.136	−0.008	<0.0001	<0.0001
Consumer Cyclical	−0.271	<0.0001	−0.132	−0.037	<0.0001	−0.018	<0.0001	<0.0001
Domestic Energy	−0.268	<0.0001	−0.072	0.246	<0.0001	0.023	<0.0001	<0.0001
Domestic Financial	−0.065	0.110	−0.025	0.046	<0.0001	0.027	0.008	0.001
Domestic Real Estate	−0.370	<0.0001	−0.121	−0.330	<0.0001	−0.107	0.001	0.000
Health Care	−0.092	<0.0001	−0.041	−0.135	<0.0001	−0.062	0.084	0.007
Industrials	−0.312	<0.0001	−0.147	−0.174	<0.0001	−0.093	0.010	0.031
Materials	−0.254	<0.0001	−0.107	−0.331	<0.0001	−0.140	0.189	0.017
Technology	0.281	<0.0001	0.130	0.472	<0.0001	0.266	<0.0001	<0.0001
Utilities	−0.272	<0.0001	−0.098	−0.150	<0.0001	−0.042	<0.0001	<0.0001
Total Funds/SPY	−0.151	<0.0001	−0.047	−0.007	<0.0001	−0.032	<0.0001	0.001

Panel B: High ESG risk Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.229	0.000	−0.096	−0.026	0.002	−0.010	0.002	0.002
Consumer Cyclical	−0.266	0.000	−0.131	−0.036	<0.0001	−0.017	0.001	0.001
Consumer Defensive	−0.383	<0.0001	−0.180	−0.202	<0.0001	−0.098	<0.0001	<0.0001
Domestic Energy	−0.254	0.000	−0.073	0.053	0.522	−0.013	<0.0001	<0.0001
Domestic Financial	−0.103	0.048	−0.043	0.038	0.000	0.023	0.008	0.001
Domestic Real Estate	−0.374	<0.0001	−0.118	−0.332	<0.0001	−0.104	0.001	<0.0001
Health Care	−0.046	0.226	−0.027	−0.163	<0.0001	−0.076	0.006	0.000
Industrials	−0.224	0.101	−0.098	−0.169	<0.0001	−0.093	0.367	0.074
Materials	−0.166	0.056	−0.086	−0.338	<0.0001	−0.143	0.060	0.007
Technology	0.119	0.000	0.062	0.491	<0.0001	0.282	<0.0001	<0.0001
Utilities	−0.314	<0.0001	−0.119	−0.186	<0.0001	−0.051	0.001	0.002
Total Funds/SPY	−0.197	<0.0001	−0.066	−0.005	<0.0001	−0.020	<0.0001	<0.0001

Panel B: High ESG risk Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.229	0.000	−0.096	−0.026	0.002	−0.010	0.002	0.002
Consumer Cyclical	−0.266	0.000	−0.131	−0.036	<0.0001	−0.017	0.001	0.001
Consumer Defensive	−0.383	<0.0001	−0.180	−0.202	<0.0001	−0.098	<0.0001	<0.0001
Domestic Energy	−0.254	0.000	−0.073	0.053	0.522	−0.013	<0.0001	<0.0001
Domestic Financial	−0.103	0.048	−0.043	0.038	0.000	0.023	0.008	0.001
Domestic Real Estate	−0.374	<0.0001	−0.118	−0.332	<0.0001	−0.104	0.001	<0.0001
Health Care	−0.046	0.226	−0.027	−0.163	<0.0001	−0.076	0.006	0.000
Industrials	−0.224	0.101	−0.098	−0.169	<0.0001	−0.093	0.367	0.074
Materials	−0.166	0.056	−0.086	−0.338	<0.0001	−0.143	0.060	0.007
Technology	0.119	0.000	0.062	0.491	<0.0001	0.282	<0.0001	<0.0001
Utilities	−0.314	<0.0001	−0.119	−0.186	<0.0001	−0.051	0.001	0.002
Total Funds/SPY	−0.197	<0.0001	−0.066	−0.005	<0.0001	−0.020	<0.0001	<0.0001

Panel C: Low ESG risk Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.535	0.009	−0.246	−0.004	0.942	0.000	0.003	0.005
Consumer Cyclical	−0.284	0.025	−0.135	−0.039	0.004	−0.020	0.035	0.038
Domestic Energy	−0.275	<0.0001	−0.072	0.357	<0.0001	0.043	<0.0001	<0.0001
Domestic Financial	0.057	0.084	0.034	0.070	<0.0001	0.042	0.656	0.608
Domestic Real Estate	−0.350	<0.0001	−0.136	−0.318	<0.0001	−0.121	0.347	0.320
Health Care	−0.146	<0.0001	−0.058	−0.101	<0.0001	−0.046	0.012	0.070
Industrials	−0.322	<0.0001	−0.153	−0.174	<0.0001	−0.093	0.013	0.032
Materials	−0.396	<0.0001	−0.143	−0.320	<0.0001	−0.136	0.029	0.391
Technology	0.430	<0.0001	0.193	0.454	<0.0001	0.252	0.275	<0.0001
Utilities	−0.251	<0.0001	−0.087	−0.130	<0.0001	−0.037	<0.0001	<0.0001
Total Funds/SPY	−0.085	<0.0001	−0.020	−0.010	<0.0001	−0.048	0.000	0.000

Panel C: Low ESG risk Fund's sample
	Mutual funds			ETFs			Difference (funds vs. ETF)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.535	0.009	−0.246	−0.004	0.942	0.000	0.003	0.005
Consumer Cyclical	−0.284	0.025	−0.135	−0.039	0.004	−0.020	0.035	0.038
Domestic Energy	−0.275	<0.0001	−0.072	0.357	<0.0001	0.043	<0.0001	<0.0001
Domestic Financial	0.057	0.084	0.034	0.070	<0.0001	0.042	0.656	0.608
Domestic Real Estate	−0.350	<0.0001	−0.136	−0.318	<0.0001	−0.121	0.347	0.320
Health Care	−0.146	<0.0001	−0.058	−0.101	<0.0001	−0.046	0.012	0.070
Industrials	−0.322	<0.0001	−0.153	−0.174	<0.0001	−0.093	0.013	0.032
Materials	−0.396	<0.0001	−0.143	−0.320	<0.0001	−0.136	0.029	0.391
Technology	0.430	<0.0001	0.193	0.454	<0.0001	0.252	0.275	<0.0001
Utilities	−0.251	<0.0001	−0.087	−0.130	<0.0001	−0.037	<0.0001	<0.0001
Total Funds/SPY	−0.085	<0.0001	−0.020	−0.010	<0.0001	−0.048	0.000	0.000

Panel D: High versus low ESG risk Fund's
	High			Low			Difference (high vs. Low)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.229	0.000	−0.096	−0.535	0.009	−0.246	0.084	0.065
Consumer Cyclical	−0.266	0.000	−0.131	−0.284	0.025	−0.135	0.866	0.947
Domestic Energy	−0.254	0.000	−0.073	−0.275	<0.0001	−0.072	0.772	0.983
Domestic Financial	−0.103	0.048	−0.043	0.057	0.084	0.034	0.009	0.002
Domestic Real Estate	−0.374	<0.0001	−0.118	−0.350	<0.0001	−0.136	0.289	0.069
Health Care	−0.046	0.226	−0.027	−0.146	<0.0001	−0.058	0.019	0.014
Industrials	−0.224	0.101	−0.098	−0.322	<0.0001	−0.153	0.167	0.056
Materials	−0.166	0.056	−0.086	−0.396	<0.0001	−0.143	0.014	0.007
Technology	0.119	0.000	0.062	0.430	<0.0001	0.193	<0.0001	<0.0001
Utilities	−0.314	<0.0001	−0.119	−0.251	<0.0001	−0.087	0.304	0.230
Total Funds	−0.197	<0.0001	−0.066	−0.085	<0.0001	−0.020	<0.0001	<0.0001

Panel D: High versus low ESG risk Fund's
	High			Low			Difference (high vs. Low)
Sector	Alpha	(p-value)	IR	Alpha	(p-value)	IR	Mean t-test (p-value)	Mean IR t-test (p-value)
Communications	−0.229	0.000	−0.096	−0.535	0.009	−0.246	0.084	0.065
Consumer Cyclical	−0.266	0.000	−0.131	−0.284	0.025	−0.135	0.866	0.947
Domestic Energy	−0.254	0.000	−0.073	−0.275	<0.0001	−0.072	0.772	0.983
Domestic Financial	−0.103	0.048	−0.043	0.057	0.084	0.034	0.009	0.002
Domestic Real Estate	−0.374	<0.0001	−0.118	−0.350	<0.0001	−0.136	0.289	0.069
Health Care	−0.046	0.226	−0.027	−0.146	<0.0001	−0.058	0.019	0.014
Industrials	−0.224	0.101	−0.098	−0.322	<0.0001	−0.153	0.167	0.056
Materials	−0.166	0.056	−0.086	−0.396	<0.0001	−0.143	0.014	0.007
Technology	0.119	0.000	0.062	0.430	<0.0001	0.193	<0.0001	<0.0001
Utilities	−0.314	<0.0001	−0.119	−0.251	<0.0001	−0.087	0.304	0.230
Total Funds	−0.197	<0.0001	−0.066	−0.085	<0.0001	−0.020	<0.0001	<0.0001

Note(s): This table reports the mean of the coefficients of two performance measures for sector funds and sector ETFs : (1) the alphas estimated from the six-factor model of Fama and French (2018) and their corresponding p-values, and (2) the information ratio (IR) measured by using the alpha for the numerator and the standard deviation of the regression-adjusted error for the denominator. Monthly returns on sector funds and sector ETFs are gathered from the Morningstar Direct Database from 2015 to 2023. Active sector funds are split into two groups based on whether their Morningstar sustainability score is below (Low) or above (High) the PCSS of their corresponding sector ETF. The two-sample t-test is used to compare the difference between the two means (high versus low) to zero (Difference)

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