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Are Water Indices Cointegrated with the World Water Markets? Evidence Based on an ARDL Bounds Testing Approach

Author

Listed:
  • Rajibur Reza

    (Department of Accounting, Finance and Economics, Griffith University, Nathan, QLD 4111, Australia)

  • Gurudeo Anand Tularam

    (��The Centre for Planetary Health and Food Security, Griffith University, Nathan, QLD 4111, Australia)

  • Bin Li

    (Department of Accounting, Finance and Economics, Griffith University, Nathan, QLD 4111, Australia)

Abstract

Since the global privatization of the water sector, water investment opportunities have become much more sought after. This study investigates the link between four water indices (S-Network Global Water Index, World Water Index, S&P Global Water Index and MSCI ACWI Water Utilities Index) and four water markets (Asia, Europe, Latin America and the US), using daily data for the period January 2004 to October 2022. Utilizing the Johansen test for cointegration during the pre-Global Financial Crisis (GFC), GFC, post-GFC, COVID-19 and full-sample periods, we find the existence of cointegrating vectors in the different periods. The Granger causality approach within a cointegration framework also allows us to assess the dynamic linkages between the stock price indices of the four water indices and the four water markets. To further confirm the empirical results in the cointegration framework, we employ the autoregressive distributed lag-based bounds approach for a robustness check. The testing results confirm the presence of cointegration in different (pre-GFC, GFC, post-GFC, COVID-19 and full-sample) periods. The analysis of the different periods allows us to better understand the relationship between global water indices and world water markets, which has important implications for investments (such as portfolio diversification) in the global water sector.

Suggested Citation

  • Rajibur Reza & Gurudeo Anand Tularam & Bin Li, 2025. "Are Water Indices Cointegrated with the World Water Markets? Evidence Based on an ARDL Bounds Testing Approach," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 1-44, June.
    • Handle: RePEc:wsi:wepxxx:v:11:y:2025:i:02:n:s2382624x24500152
    DOI: 10.1142/S2382624X24500152
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    Keywords

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    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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