Original Research

Socially responsible investing returns: Evidence from South Africa, 2004-2012

Munyaradzi Chawana
Journal of Economic and Financial Sciences | Vol 7, No 1 | a133 | DOI: https://doi.org/10.4102/jef.v7i1.133 | © 2019 Munyaradzi Chawana | This work is licensed under CC Attribution 4.0
Submitted: 22 December 2017 | Published: 30 April 2014

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Munyaradzi Chawana, Department of Finance and Investment Management, University of Johannesburg, South Africa

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A number of researchers have sought to test the theoretical prediction of Modern Portfolio Theory that asserts that Socially Responsible Investing (SRI) under-performs conventional investing. In contrast to the majority of literature, which focuses on comparing SRI funds’ performance to conventional funds, this study compares the performance of South Africa’s JSE SRI Index to the performance of local conventional market indices in the period 2004-2012. Using Sharpe ratios, the results of the study indicate that in comparison to conventional indices, the JSE SRI Index generally exhibits an inferior risk-return trade-off in both bull and bear market conditions. Furthermore, spanning tests based on the single-factor Capital Asset Pricing Model provide evidence that the JSE SRI Index is only likely to earn similar risk-adjusted returns to the Synthetic Conventional Index (a self-constructed index tracking non-overlapping conventional stocks). However, if the assumption of a non-restricted investment universe for a non-socially conscious investor is considered, there is a risk-adjusted return penalty for investing in the JSE SRI Index.


socially responsible investing; risk-adjusted returns; Modern Portfolio Theory; Capital Asset Pricing Model; JSE SRI Index; spanning test


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