Performance of Portfolios Composed of British SRI Stocks

Brzeszczynski, Janusz and McIntosh, Graham (2014) Performance of Portfolios Composed of British SRI Stocks. Journal of Business Ethics, 120 (3). pp. 335-362. ISSN 0167-4544

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Official URL: http://dx.doi.org/10.1007/s10551-012-1541-x

Abstract

This study investigates performance of portfolios composed of British socially responsible investments (SRI) stocks. Using the ‘Global-100 Most Sustainable Corporations in the World’ list (known also as ‘Global-100’) to select the SRI companies, we found that, in the period 2000–2010, the returns of the SRI portfolios were on average higher compared with the corresponding returns of the market indexes. The annual average difference in returns of the SRI portfolios (with dividends) was 5.26 % and 5.69 % relative to the FTSE100 and FTSE4GOOD indexes (the total return versions), respectively, but the differences in returns in the whole period, in individual years and in other sub-periods were in most cases not statistically significant. Positive performance of SRI stocks in the whole sample is, however, evidenced by risk-adjusted measures such as the modified Sharpe ratio (MSR) and certainty equivalent (CEQ) returns, as well as by incorporating various levels of transaction costs. Furthermore, a simple trading strategy relying on selection of SRI stocks from the Global-100 list would beat the market indexes in the whole period 2000–2010, even after inclusion of various levels of transaction costs. We also estimated the Fama–French and Carhart multi-factor models and found that the returns of the SRI portfolios cannot be consistently explained by conventional factors other than the market factor.

Item Type: Article
Uncontrolled Keywords: Corporate social responsibility (CSR), SRI stocks, Sustainable investments, Stock market returns, London Stock Exchange (LSE)
Subjects: N100 Business studies
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
Depositing User: Ellen Cole
Date Deposited: 28 Aug 2013 09:52
Last Modified: 10 Aug 2015 10:55
URI: http://nrl.northumbria.ac.uk/id/eprint/13400

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