Return and risk spillovers between the ESG global index and stock markets: Evidence from time and frequency analysis

Kılıç, Yunus; Destek, Mehmet Akif; Çevik, Emrah İsmail; Buğan, Mehmet Fatih; Korkmaz, Oya; Dibooğlu, Sel

doi:10.1016/j.bir.2022.11.015

Cited by 19 publications

(3 citation statements)

References 45 publications

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“…Existing empirical studies on ESG investments have mainly focused on the investments returns and provide equivocal results (Eccles et al, 2014;Clark et al, 2015;Verheyden et al, 2016;Auer and Schuhmach, 2016;Odell and Ali, 2016;Park and Monk, 2019;Ciciretti, et al, 2017;Hoepner and Schopohl, 2018;Erragragui, 2017;Gerard, 2018;Kilic, et al, 2022). Some studies suggest that ESG investment returns are better or at least not significantly different from conventional investment returns (Derwall et al, 2005;Kempf and Osthoff, 2007;Edmans, 2011;Bauer et al, 2005;Sharma et al, 2022;Friede et al;Memon and Tahir 2021), whereas other studies find evidence of significant ESG investment underperformance (Hong and Kacperczyk, 2009;Fabozzi et al, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

Relative Impact of the U.S. Energy Market Sentiments on Stocks and ESG Index Returns: Evidence from GCC Countries

Verma

Mohnot²

2023

IJEEP

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In this study, we provide empirical evidence on the relative impact of energy market sentiments on the stock and ESG index returns in the U.S. and Gulf Cooperation Council (GCC) economies. Specifically, we study movements in four distinct categories of energy sentiments (natural gas, crude oil, RBOB gasoline, and heating oil) displayed by professional investors and investigate their relative impact on ESG investments and stock returns in the U.S. and GCC economies. We employ the recently developed automatic time series forecasting methodology Autometrics to examine the postulated relationships. The results of the regression models suggest that there is a significant negative impact of stock sentiments and a positive impact of energy sentiments on the S&P 500 returns. However, in the case of the U.S. energy companies' returns, there are significantly higher effects of only energy market sentiments (mainly crude oil and RBOB gasoline). In the case of the GCC stock markets, there are significant positive impacts of crude oil sentiments and the S&P 500 of varying degrees of strength. The most significant impact of crude oil sentiments is observed in UAE and Saudi Arabia and is almost of the same magnitude as those on the U.S. energy companies' returns. These results are consistent with arguments provided in behavioral finance studies that investors prefer bigger profits over social returns during bullishness and step back from social investing when better investment opportunities are available. Also, ESG investing may be preferred during bearishness by utilitarian investors to generate abnormal returns during such lean periods.

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Section: Literature Reviewmentioning

confidence: 99%

Relative Impact of the U.S. Energy Market Sentiments on Stocks and ESG Index Returns: Evidence from GCC Countries

Verma

Mohnot²

2023

IJEEP

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“…As the body of literature on this topic continued to grow, researchers began incorporating more advanced methodologies and data samples. For example, Kilic et al [44] and Apostolakis et al [45] implemented time-varying parameter and mixed data sampling models, providing further evidence of the oil-stock market nexus. Additionally, Topcu et al [46], Chien et al [47], and Li et al [48] employed Granger causality tests, panel vector autoregression, and structural vector autoregression approaches, respectively, to explore the impact of oil price shocks on stock market returns across diferent countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval

Teng

2023

Discrete Dynamics in Nature and Society

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The advent of the COVID-19 pandemic has markedly affected energy valuations and financial markets. As such, this article aims to scrutinize the dynamic interplay between stock market returns and crude oil prices, with a particular focus on China, factoring in the second-moment effect of volatility spillover. Employing an EGARCH process to model the leverage impact on returns’ volatility, the analysis utilizes daily data spanning from January 30, 2020, to August 30, 2022, and incorporates causality-in-mean and variance assessments. Empirical findings indicate that the QDII-LOF benchmark, representing oil prices, exerts a substantial influence on stock market returns. Nevertheless, the complete sample reveals no discernible spillover effects attributable to oil price fluctuations. These insights imply that the Chinese government’s actions should carefully weigh the ramifications of spillovers. Concurrently, investors are advised to attentively monitor the crude oil market when making portfolio allocation decisions.

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“…Social responsibility investment is gaining importance [1] as investors are increasingly under pressure to consider ESG factors in their investment decisions [2]. ESG score, a key tool for ESG investment, evaluates a company's sustainable development capability based on its performance in the environment, social, and corporate governance dimensions.…”

Section: Introductionmentioning

confidence: 99%

An Improved TOPSIS Model Based on Cumulative Prospect Theory: Application to ESG Performance Evaluation of State-Owned Mining Enterprises

Sun

2023

Sustainability

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The aim of this study is to provide a comprehensive decision-making method that can be applied to investment decisions based on the Environmental, Social and Governance (ESG) performance. The study contributes to the existing literature by introducing the CPT-TOPSIS model, a pioneering approach that incorporates the effect of non-rational factors on decision-making results in uncertain conditions by combining cumulative prospect theory (CPT) with the classic TOPSIS model. Moreover, by conducting an application to ESG evaluation on five state-owned mining enterprises in China, the study provides evidence of the effectiveness and improvement offered by the new model in comparison with the classic TOPSISI model and prospect theory TOPSIS (PT-TOPSIS) model. The results suggest that the CPT-TOPSIS model considers risk preferences and probability distortion in the decision-making process, narrows the gap between ESG scores, and makes ESG performance evaluation more realistic.

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Return and risk spillovers between the ESG global index and stock markets: Evidence from time and frequency analysis

Cited by 19 publications

References 45 publications

Relative Impact of the U.S. Energy Market Sentiments on Stocks and ESG Index Returns: Evidence from GCC Countries

Relative Impact of the U.S. Energy Market Sentiments on Stocks and ESG Index Returns: Evidence from GCC Countries

Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval

An Improved TOPSIS Model Based on Cumulative Prospect Theory: Application to ESG Performance Evaluation of State-Owned Mining Enterprises

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