Does the Stock Market Value the Inclusion in a Sustainability Stock Index? An Event Study Analysis for German Firms
AbstractThis paper empirically analyzes the effect of the inclusion of German corporations in the Dow Jones STOXX Sustainability Index (DJSI STOXX) and the Dow Jones Sustainability World Index (DJSI World) on stock performance. In order to receive robust estimation results, we apply an event study approach that is based on both a modern asset pricing model, namely the three-factor model according to Fama and French (1993), and additionally on a GARCH model. Our empirical analysis implies that stock markets may penalize the inclusion of a firm in sustainability stock indexes. This result is mainly driven by the negative effect of the inclu-sion in the DJSI World. While we do not find significant average cumulative abnormal returns for the inclusion in the DJSI STOXX, the inclusion in the DJSI World leads to strong nega-tive impacts. This suggests that the inclusion in a more visible sustainability stock index has larger negative impacts.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201130.
Length: 38 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Sustainability stock indexes; Corporate financial performance; Event study; Three-factor model; GARCH model;
Find related papers by JEL classification:
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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