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Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms

Ulrich Oberndorfer, Peter Schmidt, Marcus Wagner and Andreas Ziegler

Journal of Environmental Economics and Management, 2013, vol. 66, issue 3, 497-509

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 (short-term) event study approach that is based on both a modern asset pricing model, namely the three-factor model according to Fama and French [24], and additionally a t-GARCH(1,1) model. Our empirical results suggest that stock markets may penalize the inclusion of a firm in sustainability stock indexes. This finding is mainly driven by a strongly negative effect of the inclusion in the DJSI World. In contrast, we do not find significant average cumulative abnormal returns for the inclusion in the DJSI STOXX. This suggests that the inclusion in a more visible sustainability stock index may have larger negative impacts.

Keywords: Sustainability stock indexes; Corporate financial performance; Event study; Three-factor model; GARCH model (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (58)

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Working Paper: Does the Stock Market Value the Inclusion in a Sustainability Stock Index? An Event Study Analysis for German Firms (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:66:y:2013:i:3:p:497-509

DOI: 10.1016/j.jeem.2013.04.005

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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