Socially responsible investing : the analysis of SRI in South Korea.

• Main Authors: Ng, Kai Xin., Lee, Wan Ning., Ng, Bao Xian.
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Business::Finance
• Online Access: http://hdl.handle.net/10356/51314
• Institution: Nanyang Technological University

For a continent that is deemed the highest potential for expansion, there has been minimal research done in the Asian context for Socially Responsible Investing (SRI) fund performance. Hence, this study aims to review the performance of SRI funds in South Korea – the second largest SRI market in Asia, ranked after Japan. This report has two main objectives. Firstly, to evaluate the performance of 10 South Korea SRI funds against seven conventional and Socially Responsible (“SR”) indices, and secondly, to explore the determinants of SRI fund performance. The research period runs from January 1, 2010 to June 29, 2012. The single-index Capital Asset Pricing Model, CAPM, is used to evaluate the performance of SRI funds. For deeper understanding of the other fund performance determinants, Fama and French [1993] Three Factor Model is also employed, here we account for two new variables – firm size and book-to-market equity ratio. Different from other researches, our research uses a duo approach to derive the SMB and HML values. Approach 1 utilizes market indices while Approach 2 uses all companies in the 10 funds under investigation to obtain SMB and HML values. After controlling for size and book-to-market variables, Approach 1 shows an overall bias towards large capitalization and growth oriented for SRI funds, while Approach 2 shows a bias towards small capitalization and value oriented. Overall, South Korea SRI funds do not outperform the market indices. This research can be extended to other countries in Asia to find out any statistical difference in SRI fund performance across various Asian markets.