Modelling Environmental Risk
As environmental issues have become increasingly important in economic research and policy for sustainable development, firms in the private sector have introduced environmental and social issues in conducting their business activities. Such behaviour is tracked by the Dow Jones Sustainable Indexes (DJSI) through financial market indexes that are derived from the Dow Jones Global Indexes. The sustainability activities of firms are assessed using criteria in three areas, namely economic, environmental and social. Risk (or uncertainty) is analysed empirically through the use of conditional volatility models of investment in sustainability-driven firms that are selected through the DJSI. The empirical analysis is based on financial econometric models to determine the underlying conditional volatility, with the estimates showing that there is strong evidence of volatility clustering, short and long run persistence of shocks to the index returns, and asymmetric leverage between positive and negative shocks to returns.
|Date of creation:||Aug 2004|
|Publication status:||Published in Environmental Modelling and Software, Volume 20, 2005, pages 191-216|
|Contact details of provider:|| Postal: P.O. Box 36, 1211 Geneva 21|
Phone: ++41 22 731 17 30
Fax: ++41 22 738 43 06
Web page: http://www.graduateinstitute.ch/economics
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