I’m running 4.2.1 on Linux and it appears to return that character correctly. (I only tested a select query not stardog reasoning explain). You haven’t mentioned if you’re running windows or not but what format did you import your ontology from? What encoding is it using? Turtle is required to be encoded in UTF-8.
I actually just found at least one of the places this is happening, and it seems to be a client issue, rather than the server. I’m looking into workarounds for it and also trying to patch it up in all the places it appears.
Well, good news and bad news. The good news is that I have found exactly where this is happening, and it will be fixed in an upcoming release. The bad news is that I don't believe there's a workaround that can be used until then.
I can confirm that the problem is in the stardog HTTP client, where the default ISO-8859-1 encoding is mistakenly being used. What this means, however, is that if you use the HTTP API directly (e.g., http://localhost:5820/myDb/icv/validate) UTF-8 can be specified for decoding the response from the Stardog server.