Investment Performance of Component Stocks from the Respect Sustainability Index at the Warsaw Stock Exchange

21 Pages Posted: 30 Jul 2018

See all articles by Janusz Brzeszczynski

Janusz Brzeszczynski

Newcastle Business School (NBS), Northumbria University, Newcastle upon Tyne, United Kingdom

Jerzy Gajdka

University of Lodz

Tomasz Schabek

University of Lodz - Faculty of Economics and Sociology

Date Written: July 28, 2018

Abstract

In this paper, we analyze the profitability of investments in stocks from the RESPECT sustainability index at the Warsaw Stock Exchange (WSE) since its launch in year 2009 until the year 2018. We calculate raw returns for individual component stocks, estimate their beta coefficients as well as assess their performance on the risk-adjusted basis using such measures as the modified Sharpe ratio (MSR) and the Certainty Equivalent (CEQ) returns. Our results indicate that the profitability of investing in the socially responsible investments (SRI) stocks from the RESPECT index is on average higher than the corresponding returns of the benchmark broad market index WIG, although the differences are rather marginal. Nevertheless, we can conclude that the financial market in Poland did not penalize the investors for allocating their funds in the SRI companies, which is the finding consistent with previous studies using the data from other countries (see e.g. Orlitzky et al. (2003)). We also investigated the indexing effect i.e. we investigate if including or removing stocks into RESPECT index results in higher return (in the day of announcement, day of actual change of components of the index, or in longer horizon). However we found very little evidence of indexing effect existence in the analysed data sample. Overall, our results provide new empirical evidence for the SRI stocks from the market in Poland and show the importance of SRI stocks in investors’ portfolios, which includes also the risk-adjusted performance perspective.

Keywords: Socially Responsible Investments (SRI), Sustainability, Stock Market Performance, Indexing effect, RESPECT index

JEL Classification: G10, G14

Suggested Citation

Brzeszczynski, Janusz and Gajdka, Jerzy and Schabek, Tomasz, Investment Performance of Component Stocks from the Respect Sustainability Index at the Warsaw Stock Exchange (July 28, 2018). 31st Australasian Finance and Banking Conference 2018. Available at SSRN: https://ssrn.com/abstract=3221828 or http://dx.doi.org/10.2139/ssrn.3221828

Janusz Brzeszczynski

Newcastle Business School (NBS), Northumbria University, Newcastle upon Tyne, United Kingdom ( email )

Department of Accounting and Financial Management
City Campus East
Newcastle upon Tyne, NE1 8ST
United Kingdom

Jerzy Gajdka

University of Lodz ( email )

Ulica Prezydenta Gabriela
Narutowicza 65 str.
Lodz, 90-131
Poland

Tomasz Schabek (Contact Author)

University of Lodz - Faculty of Economics and Sociology ( email )

3/5 POW Street
Lodz, 90-255
Poland

HOME PAGE: http://uni.lodz.pl/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
45
Abstract Views
316
PlumX Metrics