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Bhandari, Varun
- Performance of Socially Responsible Portfolios across Sectors in Indian Stock Market
Abstract Views :167 |
PDF Views:2
Design/Methodology/Approach: We have taken up S&P ESG and CNX NIFTY as the indices of socially responsible and general companies respectively. ESG index has been classified into six different sectors on the basis of GICS. Performance has been evaluated in terms of risk, return and various risk-adjusted measures like Sharpe ratio, Treynor ratio, Double Sharpe ratio, Modified Sharpe ratio, M2 measure, Jensen's alpha, Fama's decomposition measure, etc. We have also checked whether market model is sufficient to explain cross sectional variation in stock returns or we need Fama-French three factor model. The study period ranges from January 1996 - December 2013 and it is further divided into different sub-periods.
Findings: We find that socially responsible stocks across IT, FMCG and financial sectors are well rewarding in Indian stock market by generating significantly higher returns and outperforming the two indices on the basis of risk-adjusted measures employed during 18 year period and different sub-periods. The results uphold even with the use of market model and Fama-French three factor model by generating highest significant excess returns.
Originality/Value: There is no empirical evidence on the performance evaluation of socially responsible portfolios across different sectors. Hence this study is first of its kind. This will help investors in selecting best sector for investment in socially responsible companies.
Implications: Significant higher returns of ESG index and socially responsible stocks across different sectors make Socially Responsible Investing (SRI) a betterinvestment vehicle for investors in India. This is the time when general companies should change their approach and agenda towards CSR and start considering ESG issues as their investment themes. The regulators, policy makers and mutual funds should come up with different socially responsible products and sectoral indices to initiate the movement of SRI across different sectors in India.
Authors
Affiliations
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
Source
International Journal of Business Ethics in Developing Economies, Vol 5, No 1 (2016), Pagination: 10-24Abstract
Purpose: The question of whether socially responsible stocks outperform or underperform general stockshas been of keen interest for various researchers and academicians. This paper seeks to empirically examine the performance of socially responsible portfolios across various sectors and index of socially responsible and general companies in Indian stock market.Design/Methodology/Approach: We have taken up S&P ESG and CNX NIFTY as the indices of socially responsible and general companies respectively. ESG index has been classified into six different sectors on the basis of GICS. Performance has been evaluated in terms of risk, return and various risk-adjusted measures like Sharpe ratio, Treynor ratio, Double Sharpe ratio, Modified Sharpe ratio, M2 measure, Jensen's alpha, Fama's decomposition measure, etc. We have also checked whether market model is sufficient to explain cross sectional variation in stock returns or we need Fama-French three factor model. The study period ranges from January 1996 - December 2013 and it is further divided into different sub-periods.
Findings: We find that socially responsible stocks across IT, FMCG and financial sectors are well rewarding in Indian stock market by generating significantly higher returns and outperforming the two indices on the basis of risk-adjusted measures employed during 18 year period and different sub-periods. The results uphold even with the use of market model and Fama-French three factor model by generating highest significant excess returns.
Originality/Value: There is no empirical evidence on the performance evaluation of socially responsible portfolios across different sectors. Hence this study is first of its kind. This will help investors in selecting best sector for investment in socially responsible companies.
Implications: Significant higher returns of ESG index and socially responsible stocks across different sectors make Socially Responsible Investing (SRI) a betterinvestment vehicle for investors in India. This is the time when general companies should change their approach and agenda towards CSR and start considering ESG issues as their investment themes. The regulators, policy makers and mutual funds should come up with different socially responsible products and sectoral indices to initiate the movement of SRI across different sectors in India.
Keywords
Socially Responsible Investing, ESG Index, NIFTY Index, Risk-Adjusted Measures, Market Model, Fama-French Three Factor Model.
- Do Ethical Funds Underperform Conventional Funds? - Empirical Evidence from India
Abstract Views :164 |
PDF Views:1
Authors
Affiliations
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN