The performance of morally questionable shares in South Africa (2004–2019)

Journal of Economic and Financial Sciences

Field Value
Title The performance of morally questionable shares in South Africa (2004–2019)
Creator Steyn, Johannes P. Viviers, Suzette
Subject vice investing; ethical investing; virtue investing; responsible investing; moral acceptability
Description Orientation: Investors are increasingly weighing up the cost of investing in companies with adverse impacts on society and the natural environment.Research purpose: In light of the shift to responsible investing, this study compared the risk-adjusted performance of a portfolio of morally questionable shares listed on the Johannesburg Stock Exchange (JSE) to a portfolio consisting of morally acceptable (responsible) ones.Motivation for the study: Although previous research suggests that investors can perform well by investing in morally questionable shares (such as alcohol and tobacco), sentiment is rapidly moving towards a more responsible approach to selecting shares.Research approach/design and method: The historic returns of equity portfolios were evaluated over the period July 2004 to April 2019. Two equally weighted portfolios were constructed: one for morally questionable shares and the other for morally acceptable shares. These portfolios’ risk-adjusted returns were compared to the JSE Responsible Investment Composite Index, the Financial Times Stock Exchange/JSE Shareholder Weighted Index and an equally weighted benchmark. In addition, the analysis was divided into two distinct sub-periods, covering the financial crisis and the subsequent recovery period. Morally questionable companies included those with exposure to alcohol, tobacco, gambling, oil, gas and coal.Main findings: Morally questionable investing in South Africa does not produce risk-adjusted outperformance. No evidence was found to support the theories predicting the outperformance of morally questionable shares on the JSE.Practical/managerial implications: Socially and environmentally conscious investors can achieve risk-adjusted returns comparable to those of investors who opt to invest in morally questionable shares and conventional benchmarks.Contribution/value-add: The study provides insights for investors who are concerned about the opportunity costs of adopting a responsible investment approach.
Publisher AOSIS
Date 2020-10-22
Type info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion —
Format text/html application/epub+zip text/xml application/pdf
Identifier 10.4102/jef.v13i1.549
Source Journal of Economic and Financial Sciences; Vol 13, No 1 (2020); 12 pages 2312-2803 1995-7076
Language eng
Rights Copyright (c) 2020 Johannes P. Steyn, Suzette Viviers