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Risk-return and Volatility analysis of Sustainability Index in India

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  • S. Sudha

Abstract

Companies screened for their superior performance in environmental, social and governance (ESG) parameters comprise the sustainability index introduced at global as well as national stock exchanges. This study not only compares the performance of the sustainability index of India—the S&P ESG India Index with two broad market indexes, viz., the Nifty and the S&P CNX 500 using daily index data—but also analyses the inherent conditional volatility using generalised autoregressive conditional heteroscedasticity models. The results indicate that though the daily compounded returns to the ESG India Index are not statistically different from those of the Nifty or those of the CNX 500, annualised returns of the ESG India Index have been better than the returns of the other two indexes. Thus, focussing on environmental and social sustainability is a win–win situation for companies, investors and the society at large. There is significant volatility clustering in all the three indexes. The ESG India Index has been less volatile compared with the Nifty during the period. These results have corporate implications to focus on ESG parameters seriously in order to benefit from its sensitivity in the stock markets. It also reflects upon investor acceptance and potential for growth of socially responsible investments in India. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • S. Sudha, 2015. "Risk-return and Volatility analysis of Sustainability Index in India," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 17(6), pages 1329-1342, December.
    • Handle: RePEc:spr:endesu:v:17:y:2015:i:6:p:1329-1342
    DOI: 10.1007/s10668-014-9608-8
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    2. Neenu. C & T Mohamed Nishad, 2021. "Carbon Reduction and Sustainable Investment: A Way to Sustainable Development," Energy Economics Letters, Asian Economic and Social Society, vol. 8(2), pages 134-144, December.
    3. Venkata Mrudula Bhimavarapu & Shailesh Rastogi & Rajani Gupte & Geetanjali Pinto & Sudam Shingade, 2022. "Does the Impact of Transparency and Disclosure on the Firm’s Valuation Depend on the ESG?," JRFM, MDPI, vol. 15(9), pages 1-12, September.
    4. Sharma, Gagan Deep & Shahbaz, Muhammad & Singh, Sanjeet & Chopra, Ritika & Cifuentes-Faura, Javier, 2023. "Investigating the nexus between green economy, sustainability, bitcoin and oil prices: Contextual evidence from the United States," Resources Policy, Elsevier, vol. 80(C).
    5. Vishal Roy & Twinkle Jaiswal & Amit Gautam, 2024. "Assessing risk profiles of ESG portfolios in global financial markets," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 51(2), pages 183-194, June.
    6. Manuel Carlos Nogueira & Mara Madaleno, 2022. "Are Sustainability Indices Infected by the Volatility of Stock Indices? Analysis before and after the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(22), pages 1-13, November.
    7. Mustafa K. Yilmaz & Mine Aksoy & Ekrem Tatoglu, 2020. "Does the Stock Market Value Inclusion in a Sustainability Index? Evidence from Borsa Istanbul," Sustainability, MDPI, vol. 12(2), pages 1-22, January.
    8. Daniel Cupriak & Katarzyna Kuziak & Tomasz Popczyk, 2020. "Risk Management Opportunities between Socially Responsible Investments and Selected Commodities," Sustainability, MDPI, vol. 12(5), pages 1-20, March.
    9. Tao, Hu & Zhuang, Shan & Xue, Rui & Cao, Wei & Tian, Jinfang & Shan, Yuli, 2022. "Environmental Finance: An Interdisciplinary Review," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    10. Reis, Pedro Manuel Nogueira & Pinho, Carlos, 2020. "A new European investor sentiment index (EURsent) and its return and volatility predictability," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    11. Ferrat, Yann & Daty, Frédéric & Burlacu, Radu, 2022. "Does a sustainability risk premium exist where it matters the most?," Emerging Markets Review, Elsevier, vol. 53(C).
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    13. Anna Laskowska, 2018. "Stock Market Indices As A Measurment Tool For Profitability Of Corporate Social Responsibility Activities," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 7(4), pages 71-86.

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