Creation of a Socially Responsible Stock Market Index in the West African Economic and Monetary Union : Methodology and Performance

In this paper, we propose the creation of a socially responsible stock market index on the regional stock exchange (BRVM) and compare its performance with the benchmark index (BRVM composite). The mix filtering strategy as well as the capping by the floating market capitalizations were used for the constitution of the portfolio and the calculation of the socially responsible index. Through the different performance and risk measures used, the results show that the responsible index (BRVM Socially Responsible Index) outperforms the conventional index on average over the entire study period (01/01/2010-31/12/2020). The analysis of performance according to market conditions (bullish and bearish periods) indicates divergent results. In fact, during the bull market, the conventional index outperforms the responsible index based on the measures of gross profitability, modified Sharpe and Sortino. In contrast, during a downturn, the BRVM Socially Responsible Index clearly outperforms the BRVM composite and shows greater resilience compared to the 573 socially responsible stock market indices studied by Blancard et al (2021) during a covid 19 period. Furthermore, the differences in returns of the two indices are not significant for most performance measures regardless of the period selected, compared to the differences in risks, which are statistically significant in global and downward periods