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Identifying Asymmetries between Socially Responsible and Conventional Investments

Author

Listed:
  • Nicholas Apergis

    (Northumbria University, Newcastle upon Tyne, U.K.)

  • Vassilios Babalos

    (University of Piraeus, Piraeus, Greece and Technological Educational Institute of Peloponnese, Kalamata, Greece)

  • Christina Christou

    (University of Piraeus, Piraeus, Greece)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

Socially responsible investments have been a popular investment vehicle over the last decade. Employing a standard cointegration methodology along with a novel time-varying quantile cointegration approach, we estimate whether the US Dow Jones Sustainability Index (DJSI) and its conventional counterpart are integrated. The results confirm the presence of an asymmetric long-run relationship between the two indices that is not picked-up by the standard methodology of cointegration. The analysis highlights that the cointegrating relationship is quantile-dependent. These findings place any long-run diversification benefits under scrutiny, while they contain significant implications for international market participants.

Suggested Citation

  • Nicholas Apergis & Vassilios Babalos & Christina Christou & Rangan Gupta, 2015. "Identifying Asymmetries between Socially Responsible and Conventional Investments," Working Papers 201537, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201537
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    References listed on IDEAS

    as
    1. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444606.
    2. Michael Schröder, 2007. "Is there a Difference? The Performance Characteristics of SRI Equity Indices," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 331-348, January.
    3. Calvo, Clara & Ivorra, Carlos & Liern, Vicente, 2015. "Finding socially responsible portfolios close to conventional ones," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 52-63.
    4. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444590.
    5. Xiao, Zhijie, 2009. "Quantile cointegrating regression," Journal of Econometrics, Elsevier, vol. 150(2), pages 248-260, June.
    6. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    7. Leite, Paulo & Cortez, Maria Céu, 2015. "Performance of European socially responsible funds during market crises: Evidence from France," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 132-141.
    8. Ortas, Eduardo & Moneva, José M. & Salvador, Manuel, 2012. "Does socially responsible investment equity indexes in emerging markets pay off? Evidence from Brazil," Emerging Markets Review, Elsevier, vol. 13(4), pages 581-597.
    9. Anna Lamin & Srilata Zaheer, 2012. "Wall Street vs. Main Street: Firm Strategies for Defending Legitimacy and Their Impact on Different Stakeholders," Organization Science, INFORMS, vol. 23(1), pages 47-66, February.
    10. Sadorsky, Perry, 2014. "Modeling volatility and conditional correlations between socially responsible investments, gold and oil," Economic Modelling, Elsevier, vol. 38(C), pages 609-618.
    11. Nofsinger, John & Varma, Abhishek, 2014. "Socially responsible funds and market crises," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 180-193.
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    Citations

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    Cited by:

    1. Mehmet Balcilar & Riza Demirer & Rangan Gupta, 2017. "Do Sustainable Stocks Offer Diversification Benefits for Conventional Portfolios? An Empirical Analysis of Risk Spillovers and Dynamic Correlations," Sustainability, MDPI, vol. 9(10), pages 1-18, October.
    2. Joanna Górka & Katarzyna Kuziak, 2022. "Volatility Modeling and Dependence Structure of ESG and Conventional Investments," Risks, MDPI, vol. 10(1), pages 1-25, January.

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    More about this item

    Keywords

    Socially responsible investments; quantile cointegration; diversification benefits;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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