There is no statistically significant difference in the respective return series, and more important, there is no economically meaningful difference in the return differential. The variability of the two return series is almost equal during the 1987-1994 period. When one applies the F-test, one finds that series are not statistically different from one another. If there is no long term return difference, short term variations are due to style and size biases of a screened portfolio. As an example, let us examine the financial characteristics of the stocks in Vantage's unscreened and socially-screened universes as of December 1994.
ICs measure the correlation between ranked composite scores and ranked subsequent total return.
The ranked composite score is generated from a larger universe of 3000 stocks. That score is then used to forecast returns in the individual screened and unscreened universes. The most preferred stocks in the socially-screened and unscreened universe outperform the respective benchmarks. The least preferred stocks consistently underperform the benchmarks. The ICs of the unscreened and socially-screened universes are shown in the chart on the following page.