Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Do Ethical Funds Underperform Conventional Funds? - Empirical Evidence from India


Affiliations
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India
     

   Subscribe/Renew Journal


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, Jensen's alpha and information ratio), Fama's decomposition measure, paired samples t-test, and growth regression equation to accomplish the objectives. The findings suggest thatsome 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.

Keywords

Corporate Social Responsibility, Ethical Investing, Fama’s Decomposition Measure, Mutual Funds, Socially Responsible Investing.
Subscription Login to verify subscription
User
Notifications
Font Size


Abstract Views: 219

PDF Views: 1




  • Do Ethical Funds Underperform Conventional Funds? - Empirical Evidence from India

Abstract Views: 219  |  PDF Views: 1

Authors

Vanita Tripathi
Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India
Varun Bhandari
Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India

Abstract


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, Jensen's alpha and information ratio), Fama's decomposition measure, paired samples t-test, and growth regression equation to accomplish the objectives. The findings suggest thatsome 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.

Keywords


Corporate Social Responsibility, Ethical Investing, Fama’s Decomposition Measure, Mutual Funds, Socially Responsible Investing.