Socially Responsible Investing and Stock Performance: A Study on Comparison of Sustainability Indices in India (Arch & amp; Garch Approach)

Vol 21 , Issue 1 , January - June 2020 | Pages: 85-97 | Research Paper

https://doi.org/10.51768/dbr.v21i1.211202016

Published Online: January 06, 2020

Author Details ( * ) denotes Corresponding author

1. * Preeti Sharma, Assistant Professor, Amity Global Business School, Amity University, Noida, Uttar Pradesh, India (psharma55@amity.edu)

2. Deepmala Jasuja, Assistant Professor, Amity Global Business School, Amity University, Noida, Uttar Pradesh, India

Purpose: This research paper intends to contrast the performance and volatility of Socially Responsible Indices i.e. BSE GREENEX and BSE CARBONEX viz a viz BSE SENSEX over a period of 2012-2020 in terms of its risk and return and to analyze whether these Socially responsible indices outperform general indices in Indian stock market.

Design/Methodology/Approach: To achieve the desired objectives, Daily Returns of BSE SENSEX, BSE GREENEX and BSE CARBONEX has been taken for a period starting from 1st May 2012 to 28th Feb 2020.Various statistical tools as well as financial tools are applied by the researcher including CAPM Model(using OLS Regression), Sharpe Ratio, Treynor Ratio, and Jenson Alpha. To check the volatility of the indices, GARCH model has been applied.

Findings: After analyzing all the sustainability indices viz a viz SENSEX, it has been observed that during the period of study, SENSEX generated highest returns as compared to other the two sustainability indices, GREENEX and CARBONEX. Conversely, comparing GREENEX & CARBONEX, it is found that CARBONEX performs much better than GREENEX. Talking about volatility, GREENEX tops the list. It has been concluded that Socially Responsible Investing is still at an infant stage in India. So, more awareness is required on the part of investors and Indian companies have to take more initiatives in the areas of environmental concerns and governance issues.

Research Limitations: As the study has been conducted only for S&P BSE Indices. It has limited implications for other stock exchange indices.

Practical Implications: The results of the study can be very helpful for the policy makers as it has been revealed through the study that Socially Responsible Investing is at a baby stage in India. Considering its relative importance for Corporate Behavior, Transparency, Environmental outlook and Social Change, there should be more awareness and information about responsible investor behavior.

Originality/Value: This study is probably the first to empirically compare Socially Responsible Indices viz a viz general market Index.

Keywords

BSE GREENEX, SENSEX, BSE CARBONEX, ARCH, GARCH, Socially Responsible Investing, Green Investing.

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