Modelling Environmental Risk
AbstractAs environmental issues have become increasingly important in economic research and policy for sustainable development, firms in the private sector have introduced environmental and social issues in conducting their business activities. Such behaviour is tracked by the Dow Jones Sustainable Indexes (DJSI) through financial market indexes that are derived from the Dow Jones Global Indexes. The sustainability activities of firms are assessed using criteria in three areas, namely economic, environmental and social. Risk (or uncertainty) is analysed empirically through the use of conditional volatility models of investment in sustainability-driven firms that are selected through the DJSI. The empirical analysis is based on financial econometric models to determine the underlying conditional volatility, with the estimates showing that there is strong evidence of volatility clustering, short and long run persistence of shocks to the index returns, and asymmetric leverage between positive and negative shocks to returns.
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Bibliographic InfoPaper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 08-2004.
Date of creation: Aug 2004
Date of revision:
Publication status: Published in Environmental Modelling and Software, Volume 20, 2005, pages 191-216
Environmental sustainability index; environmental risk; conditional volatility; Dow Jones Sustainability Indexes; GARCH; GJR; persistence; shocks; asymmetry; moment condition; log-moment condition.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-09-30 (All new papers)
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