ESG INDEX IS GOOD FOR SOCIALLY RESPONSIBLE INVESTOR IN INDIA

<p>At present time sustainable development is a most concerning phenomenon in&nbsp;<br>almost all parts of the world, mostly in developing countries like India and China. Since&nbsp;<br>almost every country is facing the sustainability challenges distressed with environmental,&nbsp;<br>social, governance and financial crisis, sustainable development has become a universal goal.&nbsp;<br>This paper examines whether ESG(Environment Socially Governance)stocks portfolio<br>(represented by S&amp;P ESG) outperforms the blue chip stocks portfolios and the market&nbsp;<br>portfolio in the Indian stock market, by using absolute rate of return and the risk adjusted&nbsp;<br>measures viz Sharpe ratio and Treynor ratio, Jensen ratio and the CAPM. During the period&nbsp;<br>30th jan2008 to 30th September 2013, we find that ESG stocks portfolios has outperformed&nbsp;<br>the blue chip and market portfolios .ESG stocks portfolios is found to be highly correlated&nbsp;<br>with blue chip and market portfolios in India stock market. By Using absolute rate of return&nbsp;<br>we find that the ESG stocks portfolio generated higher return than the blue chip and the&nbsp;<br>market portfolio. Monthly mean return on ESG stocks portfolios is found to be higher than&nbsp;<br>the other two stocks portfolios though not significant. Using risk adjusted measures &ndash; Sharpe&nbsp;<br>ratio and Treynor and Jensen ratio, we find that ESG stocks portfolio outperform the market.&nbsp;<br>Moreover, ESG stocks portfolio is most aggressive portfolio as it is found to have high&nbsp;<br>systematic risk and the total risk than the other two portfolios. Further regression results&nbsp;<br>shows that high ESG stocks portfolio is providing higher abnormal returns as compared to<br>blue chip stocks portfolio and market portfolio. Daily results are also found to be consistent&nbsp;<br>with the monthly returns. The findings have important implications for the investors who are<br>socially responsible as they can start investing in such stocks to reap higher return as&nbsp;<br>compared to that of the market.</p>