Table 5 Performance of sector funds...

Table 5

Performance of sector funds versus sector ETFs for the pre-COVID-19 period (2015–2019)

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	−0.372	<0.0001	−0.217	−0.646	<0.0001	−0.319	<0.0001	0.001
Consumer Cyclical	−0.272	<0.0001	−0.175	−0.007	0.099	−0.006	<0.0001	<0.0001
Domestic Energy	−1.020	<0.0001	−0.341	−0.464	<0.0001	−0.204	<0.0001	<0.0001
Domestic Financial	0.081	0.022	0.074	0.193	<0.0001	0.141	0.000	0.011
Domestic Real Estate	0.001	0.938	−0.002	0.306	<0.0001	0.110	<0.0001	<0.0001
Health Care	0.050	0.350	0.091	0.091	0.000	0.065	0.271	0.464
Industrials	−0.293	0.001	−0.166	−0.140	<0.0001	−0.097	0.041	0.126
Materials	−0.572	<0.0001	−0.129	−0.324	<0.0001	−0.172	0.013	0.558
Technology	0.179	<0.0001	0.103	0.401	<0.0001	0.287	<0.0001	<0.0001
Utilities	0.108	0.006	0.038	0.297	<0.0001	0.103	<0.0001	<0.0001
Total Funds/SPY	−0.167	<0.0001	−0.041	0.010	<0.0001	0.112	<0.0001	<0.0001

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	−0.372	<0.0001	−0.217	−0.646	<0.0001	−0.319	<0.0001	0.001
Consumer Cyclical	−0.272	<0.0001	−0.175	−0.007	0.099	−0.006	<0.0001	<0.0001
Domestic Energy	−1.020	<0.0001	−0.341	−0.464	<0.0001	−0.204	<0.0001	<0.0001
Domestic Financial	0.081	0.022	0.074	0.193	<0.0001	0.141	0.000	0.011
Domestic Real Estate	0.001	0.938	−0.002	0.306	<0.0001	0.110	<0.0001	<0.0001
Health Care	0.050	0.350	0.091	0.091	0.000	0.065	0.271	0.464
Industrials	−0.293	0.001	−0.166	−0.140	<0.0001	−0.097	0.041	0.126
Materials	−0.572	<0.0001	−0.129	−0.324	<0.0001	−0.172	0.013	0.558
Technology	0.179	<0.0001	0.103	0.401	<0.0001	0.287	<0.0001	<0.0001
Utilities	0.108	0.006	0.038	0.297	<0.0001	0.103	<0.0001	<0.0001
Total Funds/SPY	−0.167	<0.0001	−0.041	0.010	<0.0001	0.112	<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	−0.276	<0.0001	−0.145	−0.542	<0.0001	−0.258	0.000	0.001
Consumer Cyclical	−0.275	<0.0001	−0.183	−0.003	0.003	−0.002	<0.0001	<0.0001
Domestic Energy	−0.745	<0.0001	−0.243	−0.426	<0.0001	−0.167	0.000	0.013
Domestic Financial	0.105	0.021	0.098	0.209	<0.0001	0.153	0.007	0.100
Domestic Real Estate	0.022	0.202	0.006	0.344	<0.0001	0.123	<0.0001	<0.0001
Health Care	0.201	0.049	0.226	0.211	<0.0001	0.146	0.886	0.244
Industrials	−0.208	0.422	−0.090	−0.128	<0.0001	−0.087	0.710	0.965
Materials	−0.685	<0.0001	−0.193	−0.361	<0.0001	−0.200	0.015	0.875
Technology	−0.001	0.980	0.023	0.478	<0.0001	0.389	<0.0001	<0.0001
Utilities	0.128	0.243	0.035	0.314	0.000	0.109	0.000	0.000
Total Funds/SPY	−0.093	<0.0001	−0.009	0.017	<0.0001	0.167	<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	−0.276	<0.0001	−0.145	−0.542	<0.0001	−0.258	0.000	0.001
Consumer Cyclical	−0.275	<0.0001	−0.183	−0.003	0.003	−0.002	<0.0001	<0.0001
Domestic Energy	−0.745	<0.0001	−0.243	−0.426	<0.0001	−0.167	0.000	0.013
Domestic Financial	0.105	0.021	0.098	0.209	<0.0001	0.153	0.007	0.100
Domestic Real Estate	0.022	0.202	0.006	0.344	<0.0001	0.123	<0.0001	<0.0001
Health Care	0.201	0.049	0.226	0.211	<0.0001	0.146	0.886	0.244
Industrials	−0.208	0.422	−0.090	−0.128	<0.0001	−0.087	0.710	0.965
Materials	−0.685	<0.0001	−0.193	−0.361	<0.0001	−0.200	0.015	0.875
Technology	−0.001	0.980	0.023	0.478	<0.0001	0.389	<0.0001	<0.0001
Utilities	0.128	0.243	0.035	0.314	0.000	0.109	0.000	0.000
Total Funds/SPY	−0.093	<0.0001	−0.009	0.017	<0.0001	0.167	<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	−0.626	0.001	−0.408	−1.740	<0.0001	−0.955	0.010	0.006
Consumer Cyclical	−0.264	0.093	−0.157	−0.018	0.258	−0.015	0.131	0.148
Domestic Energy	−1.150	<0.0001	−0.389	−0.503	<0.0001	−0.230	<0.0001	<0.0001
Domestic Financial	0.003	0.907	−0.005	0.142	<0.0001	0.102	0.000	0.000
Domestic Real Estate	−0.281	<0.0001	−0.113	−0.241	<0.0001	−0.096	0.241	0.232
Health Care	−0.096	0.001	−0.040	−0.025	<0.0001	−0.012	0.011	0.019
Industrials	−0.285	0.001	−0.164	−0.126	<0.0001	−0.084	0.041	0.093
Materials	−0.391	0.027	−0.027	−0.265	<0.0001	−0.128	0.413	0.581
Technology	0.341	<0.0001	0.172	0.332	<0.0001	0.200	0.661	0.004
Utilities	0.098	<0.0001	0.039	0.289	<0.0001	0.100	<0.0001	<0.0001
Total Funds/SPY	−0.266	<0.0001	−0.084	−0.064	0.009	−0.019	<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	−0.626	0.001	−0.408	−1.740	<0.0001	−0.955	0.010	0.006
Consumer Cyclical	−0.264	0.093	−0.157	−0.018	0.258	−0.015	0.131	0.148
Domestic Energy	−1.150	<0.0001	−0.389	−0.503	<0.0001	−0.230	<0.0001	<0.0001
Domestic Financial	0.003	0.907	−0.005	0.142	<0.0001	0.102	0.000	0.000
Domestic Real Estate	−0.281	<0.0001	−0.113	−0.241	<0.0001	−0.096	0.241	0.232
Health Care	−0.096	0.001	−0.040	−0.025	<0.0001	−0.012	0.011	0.019
Industrials	−0.285	0.001	−0.164	−0.126	<0.0001	−0.084	0.041	0.093
Materials	−0.391	0.027	−0.027	−0.265	<0.0001	−0.128	0.413	0.581
Technology	0.341	<0.0001	0.172	0.332	<0.0001	0.200	0.661	0.004
Utilities	0.098	<0.0001	0.039	0.289	<0.0001	0.100	<0.0001	<0.0001
Total Funds/SPY	−0.266	<0.0001	−0.084	−0.064	0.009	−0.019	<0.0001	<0.0001

Panel D: High vs low ESG risk funds
	High			Low			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	−0.276	<0.0001	−0.145	−0.626	0.001	−0.408	0.013	<0.0001
Consumer Cyclical	−0.275	<0.0001	−0.183	−0.264	0.093	−0.157	0.936	0.754
Domestic Energy	−0.745	<0.0001	−0.243	−1.150	<0.0001	−0.389	0.000	0.001
Domestic Financial	0.105	0.021	0.098	0.003	0.907	−0.005	0.055	0.020
Domestic Real Estate	0.022	0.202	0.006	−0.281	<0.0001	−0.113	<0.0001	<0.0001
Health Care	0.201	0.049	0.226	−0.096	0.001	−0.040	0.006	0.002
Industrials	−0.208	0.422	−0.090	−0.285	0.001	−0.164	0.720	0.415
Materials	−0.685	<0.0001	−0.193	−0.391	0.027	−0.027	0.135	0.387
Technology	−0.001	0.980	0.023	0.341	<0.0001	0.172	<0.0001	<0.0001
Utilities	0.128	0.243	0.035	0.098	<0.0001	0.039	<0.0001	0.934
Total Funds	−0.093	<0.0001	−0.009	−0.266	<0.0001	−0.084	<0.0001	0.000

Panel D: High vs low ESG risk funds
	High			Low			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	−0.276	<0.0001	−0.145	−0.626	0.001	−0.408	0.013	<0.0001
Consumer Cyclical	−0.275	<0.0001	−0.183	−0.264	0.093	−0.157	0.936	0.754
Domestic Energy	−0.745	<0.0001	−0.243	−1.150	<0.0001	−0.389	0.000	0.001
Domestic Financial	0.105	0.021	0.098	0.003	0.907	−0.005	0.055	0.020
Domestic Real Estate	0.022	0.202	0.006	−0.281	<0.0001	−0.113	<0.0001	<0.0001
Health Care	0.201	0.049	0.226	−0.096	0.001	−0.040	0.006	0.002
Industrials	−0.208	0.422	−0.090	−0.285	0.001	−0.164	0.720	0.415
Materials	−0.685	<0.0001	−0.193	−0.391	0.027	−0.027	0.135	0.387
Technology	−0.001	0.980	0.023	0.341	<0.0001	0.172	<0.0001	<0.0001
Utilities	0.128	0.243	0.035	0.098	<0.0001	0.039	<0.0001	0.934
Total Funds	−0.093	<0.0001	−0.009	−0.266	<0.0001	−0.084	<0.0001	0.000

Note(s): This table reports the mean of the coefficients of two performance measures for sector funds and sector ETFs for the pre-COVID-19 period (2015–2019) : (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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