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Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change

Year 2021, Volume: 13 Issue: 2, 41 - 58, 11.12.2021
https://doi.org/10.33818/ier.787620

Abstract

This study aims at investigating the performance of Indian stock indices augmenting carbon emissions such as BSE Energy index and BSE Oil & Gas index vis a-vis BSESNSEX, the apex index representing Indian stock market, and also of those indices capturing the commitment of industries towards mitigating risks arising from pollution and climate change, such as BSE Greenex and BSE Carbonex, with reference to investors’ benchmark index viz., BSESENSEX, during the period January 2010 to December 2019. Besides using three risk adjusted return ratios, namely, the Sharpe ratio, Treynor ratio, and Jensen’s Alpha, on all the five indices, we have also applied GARCH-in-mean model to find if there is a risk premium involved either for causing emission or for mitigating the ill effects of emission. The results show that BSE Carbonex outperforms BSESENSEX and all the three other indices in terms of the three performance metrics used. Moreover, all green indices and BSESENSEX show significant presence of risk premium in terms of GARCH-in-mean model. Overall, therefore, the study finds that some of the green funds such as those representing BSE Carbonex outperform BSESENSEX compared to traditional funds in India.

References

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  • Binsbergen, J.H. and R. Koijen (2015). The term structure of returns: facts and theory. NBER Working Paper, Working Paper 21234.
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  • Daly, Herman E. (1991). Steady-State Economics.Second edition, Washington, DC: Island Press.
  • Eyraud, L., A. Wane, Ch. Zhang and B. Clements (2011). Who’s Going Green and Why? Trends and Determinants of Green Investment. IMF Working Paper WP/11/296.
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  • Inderst, G., C. Kaminker andF. Stewart (2012). Defining and Measuring Green Investments: Implications for Institutional Investors’ Asset Allocations.OECD Working Papers on Finance, Insurance and Private Pensions, No.24, OECD Publishing.
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  • Mossin, Jan (1966). Equilibrium in a Capital Asset Market. Econometrica, 34 (4), 768–783.
  • Nelson, D.B. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach.Econometrica, 59, 347-370.
  • OECD (2011). Retrieved May 17,2021from https://www.oecd.org/greengrowth/48224574.pdf.
  • Principles for Responsible Investing. (https://www.unpri.org/pri/what-are-the-principles-for-responsible-investment)
  • Rana, M. and W.Akhter (2015). Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy.Financial Innovation, 1(5).
  • Sarkar, N. and D. Mukhopadhyay (2005). Testing predictability and nonlinear dependence in the Indian stock market. Emerging Markets Finance and Trade, 51, 7–44.
  • Sharpe, William F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, 19 (3), 425–442.
  • Sirbu, R.M., A. Draghici, O.Loboont and A. Sirbu(2015).Debate On the Decision-Making Process for Green Investments in Sustainable Development Context. InConference Proceedings, Managing Intellectual Capital and Innovation for Sustainable and inclusive society. TIIM, Italy.
  • Trana, T., H. Dob, T. Vub and N. Don (2020). The factors affecting green investment for sustainable development. Decision Science Letter, 9, 365-386.
  • Tripathi, V. and A. Kaur (2021). Does Socially Responsible Investing Pay in Developing Countries? A Comparative Study Across Select Developed and Developing Markets.FIIB Business Review, https://doi.org/10.1177/2319714520980288.
Year 2021, Volume: 13 Issue: 2, 41 - 58, 11.12.2021
https://doi.org/10.33818/ier.787620

Abstract

References

  • Berkley Lab (2011). International Energy Studies, Retrieved May 18, 2021, from https://openei.org/wiki/LBNL_International_Energy_Studies.
  • Binsbergen, J.H. and R. Koijen (2015). The term structure of returns: facts and theory. NBER Working Paper, Working Paper 21234.
  • Boulatoff, C. and C.M. Boyer, (2009). Green recovery: How are environmental stocks doing? Journal of Wealth Management, 12, 9-20.
  • CII Report (2008). Retrieved 17 May, 2021, from https://cii.in/WebCMS/Upload/CII%20- %20Building%20a%20Low-Carbon%20Indian%20Economy.pdf.
  • Daly, Herman E. (1991). Steady-State Economics.Second edition, Washington, DC: Island Press.
  • Eyraud, L., A. Wane, Ch. Zhang and B. Clements (2011). Who’s Going Green and Why? Trends and Determinants of Green Investment. IMF Working Paper WP/11/296.
  • Fiorino, Daniel J. (2014). The Political Economy of Green Growth: Reframing Ecology, Economics, and Equity. In World Congress of the International Political Science Association, Montreal, Quebec, July 22, 2014 (RC 38 on Politics and Business).
  • Fiorino, Daniel J. (2001). Environmental Policy as Learning: A New View of an Old Landscape. Public Administration Review, 61, 322-334.
  • FTSE Russell Study (2018). Retrieved May 18, 2021, from https://www.ftserussell.com › research › 2018-step-chan.
  • GGGI Report(2015). Retrieved May 19, 2021, from http://gggi.org/wp-content/uploads/2016/06/GGGI-2015-Annual-Report_web.compressed.pdf.
  • Giddens, A. (1999). The Third Way: The Renewal of Social Democracy. Cambridge, UK: Polity Press.
  • Inderst, G., C. Kaminker andF. Stewart (2012). Defining and Measuring Green Investments: Implications for Institutional Investors’ Asset Allocations.OECD Working Papers on Finance, Insurance and Private Pensions, No.24, OECD Publishing.
  • IPCC Retrieved May 18, 2021, from https://www.ipcc.ch.
  • Linter, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics, 47 (1), 13–37.
  • Michael, S. (2007). Is There a Difference? The Performance Characteristics of SRI Equity Indices, February 2007. Journal of Business Finance and Accounting, 34(1-2), 331-348.
  • Mossin, Jan (1966). Equilibrium in a Capital Asset Market. Econometrica, 34 (4), 768–783.
  • Nelson, D.B. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach.Econometrica, 59, 347-370.
  • OECD (2011). Retrieved May 17,2021from https://www.oecd.org/greengrowth/48224574.pdf.
  • Principles for Responsible Investing. (https://www.unpri.org/pri/what-are-the-principles-for-responsible-investment)
  • Rana, M. and W.Akhter (2015). Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy.Financial Innovation, 1(5).
  • Sarkar, N. and D. Mukhopadhyay (2005). Testing predictability and nonlinear dependence in the Indian stock market. Emerging Markets Finance and Trade, 51, 7–44.
  • Sharpe, William F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, 19 (3), 425–442.
  • Sirbu, R.M., A. Draghici, O.Loboont and A. Sirbu(2015).Debate On the Decision-Making Process for Green Investments in Sustainable Development Context. InConference Proceedings, Managing Intellectual Capital and Innovation for Sustainable and inclusive society. TIIM, Italy.
  • Trana, T., H. Dob, T. Vub and N. Don (2020). The factors affecting green investment for sustainable development. Decision Science Letter, 9, 365-386.
  • Tripathi, V. and A. Kaur (2021). Does Socially Responsible Investing Pay in Developing Countries? A Comparative Study Across Select Developed and Developing Markets.FIIB Business Review, https://doi.org/10.1177/2319714520980288.
There are 25 citations in total.

Details

Primary Language English
Subjects Finance
Journal Section Articles
Authors

Debabrata Mukhopadhyay

Nityananda Sarkar This is me

Publication Date December 11, 2021
Submission Date August 29, 2020
Published in Issue Year 2021 Volume: 13 Issue: 2

Cite

APA Mukhopadhyay, D., & Sarkar, N. (2021). Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change. International Econometric Review, 13(2), 41-58. https://doi.org/10.33818/ier.787620
AMA Mukhopadhyay D, Sarkar N. Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change. IER. December 2021;13(2):41-58. doi:10.33818/ier.787620
Chicago Mukhopadhyay, Debabrata, and Nityananda Sarkar. “Do Green and Energy Indices Outperform BSESENSEX in India? Some Evidence on investors’ Commitment towards Climate Change”. International Econometric Review 13, no. 2 (December 2021): 41-58. https://doi.org/10.33818/ier.787620.
EndNote Mukhopadhyay D, Sarkar N (December 1, 2021) Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change. International Econometric Review 13 2 41–58.
IEEE D. Mukhopadhyay and N. Sarkar, “Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change”, IER, vol. 13, no. 2, pp. 41–58, 2021, doi: 10.33818/ier.787620.
ISNAD Mukhopadhyay, Debabrata - Sarkar, Nityananda. “Do Green and Energy Indices Outperform BSESENSEX in India? Some Evidence on investors’ Commitment towards Climate Change”. International Econometric Review 13/2 (December 2021), 41-58. https://doi.org/10.33818/ier.787620.
JAMA Mukhopadhyay D, Sarkar N. Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change. IER. 2021;13:41–58.
MLA Mukhopadhyay, Debabrata and Nityananda Sarkar. “Do Green and Energy Indices Outperform BSESENSEX in India? Some Evidence on investors’ Commitment towards Climate Change”. International Econometric Review, vol. 13, no. 2, 2021, pp. 41-58, doi:10.33818/ier.787620.
Vancouver Mukhopadhyay D, Sarkar N. Do Green and Energy Indices Outperform BSESENSEX in India? Some evidence on investors’ commitment towards climate change. IER. 2021;13(2):41-58.