CONNECTIONS BETWEEN SENTIMENT INDICES AND REDUCED VOLATILITIES OF SUSTAINABILITY STOCK MARKET INDICES

Iulia Lupu, Gheorghe Hurduzeu () and Mariana Nicolae-Balan ()
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Gheorghe Hurduzeu: The Bucharest University of Economic Studies

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2016, vol. 50, issue 1, 157-174

Abstract: Capital markets provide the framework for the evaluation of a wide selection of issues, ranging from investors’ psychological profiles to likelihoods of various expected long-term, i.e. sustainable scenarios. Using a large class of models from the GARCH family to estimate conditional volatilities, we perform a comparative analysis of the dynamics of risks for two classes of indices: on one hand the sustainability indices, built as portfolios of companies active in the fields of sustainable development, and on the other hand a series of regular stock market indices, used as benchmarks for regular economic performance. We found clear evidence that the risk of benchmark indices, measured using many volatility models from the GARCH family is larger than the ones characterizing the sustainability related counterparts. This paper shows that that these differences in volatilities exhibit explanatory power for economic sentiment indices employing a MIDAS methodology that allows for the connection of time series with different frequencies.

Keywords: volatility; sustainability indices; stock market; high-frequency data; MIDAS regression. (search for similar items in EconPapers)
JEL-codes: G17 G32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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