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Performance of Portfolio Composed of the SRI Energy Companies

Student: Svechnikov Daniil

Supervisor: Victor A Lapshin

Faculty: Faculty of Economic Sciences

Educational Programme: Corporate Finance (Master)

Final Grade: 7

Year of Graduation: 2017

This study investigates financial performance of social responsible investments energy portfolio in comparison with MSCI KLD400 Social Index and the Platts 250 energy ranking. Paper found that, in the period 2005-2015, the SRI energy portfolio underperformed the Platts energy companies and outperformed KLD400 Social Index. The average return with dividends in the whole period for SRI energy portfolio is 13.184% for Social index and the Platts 250 are 6.899% and 14.875% correspondingly. Estimations showed that the difference in returns with dividends between the SRI energy portfolio and its conventional counterparties are statistically insignificant. However, analysis of Modified Sharpe Ratio showed that risk-adjusted returns of the SRI energy portfolio, in the major number of individual and multi-year periods as well as in the overall investigation, are the highest and equal 0.3166. The modified Sharpe Ratios for the Platts 250 and KLD400 Index are 0.0930 and 0.1578 accordingly. Furthermore, estimation of Pearson correlation coefficient provided that SRI energy portfolio and the Platts 250 have the strongest correlation. Moreover, this study examined the Fama-French and Carhart multi-factor models for the SRI energy portfolio. Observation showed that market factor was statistically meaningful for portfolio returns, nonetheless size, book-to-market and momentum factors are insignificant in whole period. In the whole period estimate Alpha in Fama-French model was significant, however, in Carhart multi-factor model it was not meaningful.

Full text (added May 15, 2017)

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