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Persistence in ESG and conventional stock market indices

Author

Listed:
  • Guglielmo Maria Caporale

    (Brunel University London)

  • Luis Gil-Alana

    (University of Navarra)

  • Alex Plastun

    (Sumy State University)

  • Inna Makarenko

    (Sumy State University)

Abstract

This paper uses R/S (Rescaled Range) analysis and fractional integration techniques to examine the persistence of two sets of 12 ESG (Environmental, Social and Governance) and conventional stock price indices from the MSCI ((Morgan Stanley Capital International) database over the period 2007–2020 for a large number of both developed and emerging markets. Both sets of results imply that there are no significant differences between the two types of indices in terms of the degree of persistence and its dynamic behaviour. However, higher persistence is found for the emerging markets examined (especially the BRICS, i.e. Brazil, Russia, India, China and South Africa), which suggests that they are less efficient and thus offer more opportunities for profitable trading strategies. Possible explanations for these findings include different type of companies’ ‘camouflage’ and ‘washing’ (green, blue, pink, social, and Sustainable Development Goals—SDG) in the presence of rather lax regulations for ESG reporting.

Suggested Citation

  • Guglielmo Maria Caporale & Luis Gil-Alana & Alex Plastun & Inna Makarenko, 2022. "Persistence in ESG and conventional stock market indices," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(4), pages 678-703, October.
    • Handle: RePEc:spr:jecfin:v:46:y:2022:i:4:d:10.1007_s12197-022-09580-0
    DOI: 10.1007/s12197-022-09580-0
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    Cited by:

    1. 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.
    2. Kohnert, Dirk, 2023. "Moral Money in Sub-Saharan Africa? On ensuring ethics to drive sustainable investment," MPRA Paper 117779, University Library of Munich, Germany.
    3. Larissa M. Batrancea & Ömer Akgüller & Mehmet Ali Balcı & Anca Nichita, 2024. "Financial network communities and methodological insights: a case study for Borsa Istanbul Sustainability Index," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-27, December.
    4. Kohnert, Dirk, 2023. "La monnaie morale en Afrique subsaharienne ? Garantir l'éthique pour favoriser l'investissement durable [Moral Money in Sub-Saharan Africa? On ensuring ethics to drive sustainable investment]," MPRA Paper 117780, University Library of Munich, Germany.

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    More about this item

    Keywords

    Stock market; ESG; Persistence; Long Memory; R/S Analysis; Fractional Integration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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