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The Dynamic Volatility Connectedness of Major Environmental, Social, and Governance (ESG) Stock Indices: Evidence Based on DCC-GARCH Model

Author

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  • Muneer Shaik

    (Mahindra University)

  • Mohd Ziaur Rehman

    (King Saud University)

Abstract

This study investigates the dynamic volatility connectivity of important environmental, social, and governance (ESG) stock indexes from May 2010 to March 2021. The empirical research is focused on five major S&P ESG stock indexes from the US, Latin America, Europe, the Middle East and Africa, and Asia Pacific regions. The study reveals that ESG stock indexes in the Middle East Africa, and Latin America are net shock transmitters, whereas the United States and Asia Pacific are net volatility receivers. Furthermore, the study finds that bilateral intercorrelations are higher among US, Latin America, and Europe region group pairs and weaker in relation to Middle East Africa and Asia Pacific region group pairs, indicating the presence of contagion within developed and/or emerging regions, which has relevance for portfolio and risk management.

Suggested Citation

  • Muneer Shaik & Mohd Ziaur Rehman, 2023. "The Dynamic Volatility Connectedness of Major Environmental, Social, and Governance (ESG) Stock Indices: Evidence Based on DCC-GARCH Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 231-246, March.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:1:d:10.1007_s10690-022-09393-5
    DOI: 10.1007/s10690-022-09393-5
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    More about this item

    Keywords

    ESG stock indices; DCC-GARCH; Volatility connectedness; Spillover; VAR;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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