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The effect on price, liquidity and risk when stocks are added to and deleted from a sustainability index: Evidence from the Asia Pacific context


  • Cheung, Adrian (Wai Kong)
  • Roca, Eduardo


We examine the impact on returns, risk and liquidity of stocks in the Asia Pacific markets when included into and deleted from the Dow Jones Sustainability World Index over the period 2002–2010. Using an event study methodology, we test five existing hypotheses and two new ones, called the “sustainability taste hypothesis” and “sustainability redundancy hypothesis”, which we developed. Consistent with the “sustainability redundancy hypothesis”, we find that both index addition and index deletion stocks experience a significant decline in returns, an increase in trading volume, no change in systematic risk and an increase in idiosyncratic risk. This indicates that sustainability matters to Asia Pacific investors, although in a somewhat negative manner.

Suggested Citation

  • Cheung, Adrian (Wai Kong) & Roca, Eduardo, 2013. "The effect on price, liquidity and risk when stocks are added to and deleted from a sustainability index: Evidence from the Asia Pacific context," Journal of Asian Economics, Elsevier, vol. 24(C), pages 51-65.
  • Handle: RePEc:eee:asieco:v:24:y:2013:i:c:p:51-65 DOI: 10.1016/j.asieco.2012.08.002

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    References listed on IDEAS

    1. Honghui Chen & Gregory Noronha & Vijay Singal, 2004. "The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation," Journal of Finance, American Finance Association, vol. 59(4), pages 1901-1930, August.
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    Cited by:

    1. repec:spr:jeicoo:v:12:y:2017:i:2:d:10.1007_s11403-015-0161-9 is not listed on IDEAS
    2. 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.

    More about this item


    Corporate sustainability; Index additions and deletions; Asia Pacific; Event study;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other


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