Fractional Integration in Corporate Social Responsibility Indices: A FIGARCH and HYGARCH Approach
John Francis Diaz,
Jo-Hui Chen and
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Quynh-Trang Nguyen: PhD Student, PhD Program in Business, College of Business, Chung Yuan Christian University 200 Chung Pei Road, Chung Li District, Taoyuan City, Taiwan 32023, R.O.C.
John Francis Diaz: Associate Professor, Department of Finance and Department of Accounting, Chung Yuan Christian University 200 Chung Pei Road, Chung Li District, Taoyuan City, Taiwan 32023, R.O.C.
Jo-Hui Chen: Professor, Department of Finance, Chung Yuan Christian University 200 Chung Pei Road, Chung Li District, Taoyuan City, Taiwan 32023, R.O.C.
Ming-Yen Lee: Associate Professor, Department of Business Administration, Chung Yuan Christian University 200 Chung Pei Road, Chung Li District, Taoyuan City, Taiwan 32023, R.O.C.
Asian Economic and Financial Review, 2019, vol. 9, issue 7, 836-850
This research focuses on studying the return and volatility of CSR indices. Four models namely ARFIMA, ARFIMA-GARCH, ARFIMA-FIGARCH and ARFIMA-HYGARCH were applied to investigate the long-memory process in these indices. This paper provides investors with knowledge of CSR indices? time-series data structure, and identifies the most suitable model for volatility estimation. The dataset included 16 CSR indices in terms of environmental, social and corporate governance performance (ESG) under four categories regarding different regional markets in the world. The results show that all the indices exhibit long-memory process, which indicates that predicting their CSR index volatilities in the future to gain excess profits is feasible. In addition, based on log-likelihood values, ARFIMA-HYGARCH appears as the best fitting model to estimate the long-memory effect over the other GARCH models. This paper acknowledges the increasing importance of CSR in selecting investment portfolios to not just maximize returns, but to also promote responsible financing.
Keywords: CSR indices; SRI; Long-memory effect; Volatility; FIGARCH; HYGARCH. (search for similar items in EconPapers)
JEL-codes: G02 G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:2019:p:836-850
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