Abstract
There has been ongoing discussion about the performance of ethical investments. Unlike previous studies, this research used extension Markowitz model to measure the market-based performance of ethical investments in Indonesia. In addition, this research also investigated whether gold was the safe haven instrument for the extension-Markowitz portfolio in Indonesia when the equity market was in extreme turmoil. The stocks from environmentally friendly firms (SRI) and Jakarta Islamic Index (JII) in Indonesia were used as the proxies of ethical investments. The results showed that the extension of Markowitz model could create an optimum portfolio that outperformed the market index. The result of this study supported the social impact hypothesis implying that environmental and social spending could improve stock market performance. Also, based on quantile regression (QREG) and ordinary least squares (OLS), this study found that gold was the safe haven and hedging instrument for ethical investors in Indonesia.
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