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Does the Stock Market Value the Inclusion in a Sustainability Stock Index? An Event Study Analysis for German Firms

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Author Info

  • Ulrich Oberndorfer

    ()
    (Federal Ministry of Economics and Technology)

  • Marcus Wagner

    ()
    (Julius-Maximilians-University Würzburg)

  • Andreas Ziegler

    ()
    (JUniversity of Kassel)

Abstract

This 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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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/30-2011_ziegler.pdf
File Function: First version, 2011
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Bibliographic Info

Paper 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.

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Length: 38 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201130

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Related research

Keywords: Sustainability stock indexes; Corporate financial performance; Event study; Three-factor model; GARCH model;

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Cited by:
  1. José E. Gómez-González & Luis Fernando Melo Velandia, 2013. "Efectos de “ángeles caídos” en el mercado accionario colombiano: estudio de eventos del caso Interbolsa," Borradores de Economia 779, Banco de la Republica de Colombia.

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