Purpose – The purpose of this paper is to empirically examine the performance of socially responsible stocks portfolio vis-à-vis portfolios of general companies in the Indian stock market. Design/methodology/approach – The study has used absolute rate of return as well as various risk adjusted measures like Sharpe ratio, Treynor ratio, Jensen’s α, Information ratio, Fama’s decomposition measure and dummy regression model to evaluate the performance of various portfolios. Findings – Socially responsible stocks portfolios are found to have lower relative risk despite having higher systematic risk. Further the authors find that during crisis and post-crisis period, socially responsible stocks portfolio generated significantly higher return as compared to other portfolios in the Indian stock market. Environmental, social and governance (ESG) Index and GREENEX Index provided positive net selectivity returns in all the three sub periods, especially during crisis period. GREENEX and ESG outperformed NIFTY and SENSEX even on net selectivity basis. This indicates that the compromise made with respect to diversification by investing in socially responsible stocks portfolios was well rewarded in terms of higher returns in Indian context. Practical implications – The findings lend support to the case of socially responsible investing (SRI) in India and are relevant for companies, regulators, policy makers and investors at large. Mutual funds and other investment funds should launch schemes which invest in socially responsible stocks so as to provide the benefits of SRI even to small investors in India. Originality/value – The study contributes to the related literature by analysing the performance of socially responsible stocks portfolios in Indian stock market which is one of the emerging markets.
One of the significant developments in the investing community is the rise of socially responsible or ethical investments during last two decades. Because of the increasing size and importance of ethical mutual funds, this paper seeks to evaluate and compare the performance of ethical mutual funds with general funds and benchmark index (S&P BSE Shariah 500 Equity Index) in the Indian market. The sample comprises six ethical fund schemes and three general fund schemes of Tauras mutual fund over the period 2009-2014 using weekly NAVs. The study uses return, risk, risk-adjusted measures (Sharpe ratio, Treynor ratio, Jensens alpha and information ratio), Famas decomposition measure, paired samples t-test, and growth regression equation to accomplish the objectives. The findings suggest that some of the ethical funds generated significantly higher return than other funds and benchmark index. Despite having higher risk, ethical funds outperformed other funds and benchmark index on the basis of various risk-adjusted measures and net selectivity returns. This indicates that the compromise made with respect to diversification by investing in ethical funds was well rewarded in terms of higher returns in Indian context. Our findings lend support to the case of ethical investing in India. Mutual funds and other investment funds should launch schemes which invest in socially responsible or ethical stocks.
Foreign direct investment (FDI) has boosted financial stability, growth and development in India. There has been positive growth rate in GDP since FDI in India has been allowed. FDI has also acted as the resistor during global financial crisis 2008. Many pull factors in India have attracted FDI which include rapidly expanding consumer market, easy access to other neighbouring countries, accessibility to cheaper basic inputs, well-developed and stable banking system and favourable policies for foreign investors, etc.This article attempts to find out the existence of relationship between FDI and six macroeconomic factors-Exchange rate (` per $), Inflation (WPI), GDP/IIP (proxy for Market size), Interest rate (91 days T-bills), Trade Openness and S&P CNX 500 Equity Index (profitability) using monthly and quarterly data for the period starting from July 1997 to December 2011. Apart from using the standard techniques, such as ADF and PP Unit root stationarity test, Bi-variate and Multi-variate Regression analysis and Granger Causality test, we have also applied advanced econometric techniques such as Johansen's cointegration test, Vector Auto Regression (VAR) and Impulse Response analysis to check for long-run and short-run dynamic relationship.The results show a significant correlation between FDI and all macroeconomic variables (except for Exchange rate). Causality results show that IIP/GDP, WPI and S&P CNX 500 Equity Index are Granger causing FDI inflows in India while Trade Openness is Granger caused by the same. All the macroeconomic variables taken in the article (except exchange rate) are significantly affecting FDI inflows and the overall explanatory power of the regression model (i.e., Adjusted R square) is 75.7 per cent. The results of Johansen's cointegration test disclose that there is long-run causal relation between FDI and IIP; FDI and S&P CNX 500 Equity, FDI and Trade Openness and FDI and WPI. VAR and Impulse response function analysis show that FDI is caused more by its own lagged values rather those of other macroeconomic factors.These results are important for policy makers, regulators and foreign investors. Policy makers and regulators are required to push reform agenda in domestic market for attracting huge FDI inflows in the country. Foreign investors want the policies of the country to be stable and transparent to provide enough safeguard for their investments because instability increases the risk to the foreign investors. Since, we find positive relationship between FDI and profitability, a higher investor's confidence in domestic market acts as a stimulus in getting more FDI inflows.
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