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Connections Between Sentiment Indices And Reduced Volatilities Of Sustainability Stock Market Indices

Author

Listed:
  • Iulia LUPU

    (Center for Financial and Monetary Research “Victor Slăvescu”)

  • Gheorghe HURDUZEU

    (The Bucharest University of Economic Studies)

  • Mariana NICOLAE

    (The Bucharest University of Economic Studies)

Abstract

Capital markets provide the framework for the evaluation of a wide selection of issues, ranging from investors’ psychological profiles to likelihoods of various expected long-term, i.e. sustainable scenarios. Using a large class of models from the GARCH family to estimate conditional volatilities, we perform a comparative analysis of the dynamics of risks for two classes of indices: on one hand the sustainability indices, built as portfolios of companies active in the fields of sustainable development, and on the other hand a series of regular stock market indices, used as benchmarks for regular economic performance. We found clear evidence that the risk of benchmark indices, measured using many volatility models from the GARCH family is larger than the ones characterizing the sustainability related counterparts. This paper shows that that these differences in volatilities exhibit explanatory power for economic sentiment indices employing a MIDAS methodology that allows for the connection of time series with different frequencies.

Suggested Citation

  • Iulia LUPU & Gheorghe HURDUZEU & Mariana NICOLAE, 2016. "Connections Between Sentiment Indices And Reduced Volatilities Of Sustainability Stock Market Indices," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(1), pages 157-174.
    • Handle: RePEc:cys:ecocyb:v:50:y:2016:i:1:p:157-174
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    References listed on IDEAS

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    Cited by:

    1. de Oliveira, Erick Meira & Cunha, Felipe Arias Fogliano de Souza & Palazzi, Rafael Baptista & Klotzle, Marcelo Cabus & Maçaira, Paula Medina, 2020. "On the effects of uncertainty measures on sustainability indices: An empirical investigation in a nonlinear framework," International Review of Financial Analysis, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    volatility; sustainability indices; stock market; high-frequency data; MIDAS regression.;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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