A Comparative Analysis of Performance of Negative and Positive Socially Screened Portfolios at the Nairobi Securities Exchange

Abstract

Studies in Kenya have shown the need to embrace Socially Responsible Investing at the NSE. This study sought to form a Negative and Positive Screened Portfolio at the NSE and compare the performance of the two portfolios. For the negative screening S&P 500 Index-was used and for the positive screening MSCI KLD 400 Index was used. The study used descriptive correlation design to compare performance of the positive and negatively screened portfolio. Out of the 64 companies listed at the NSE average weekly returns for the five year period was calculated and then the Sharpe’s ratio was used to determine the performance of the two portfolios. At 5% level of significance it was found out that there was a significant relationship between socially screening and portfolio performance since p=0.028˂ 0.05, and also the study found out that positively screened portfolio perform better than negatively screened portfolio. The study suggests that there is need to come up with an efficient positively socially screened portfolio and the returns of the portfolio compared to the market portfolio or the negatively screened portfolio. This will give a better measure without having the returns of the portfolio being weighed down by poorly performing stocks.