Exploring the connectedness between major volatility indexes and worldwide sustainable investments

Danyang Xu, Yang Hu, Les Oxley, Boqiang Lin () and Yongda He

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: This paper examines the dynamic connectedness between various measures of volatility indexes (e.g., Engle and Campos-Martins (2023)’s global common volatility index (COVOL), VIX, OVX, GVZ) and worldwide ESG leaders’ equity markets, using an aggregated connectedness approach for the period January 2014 to April 2023. Several novel findings are presented. First, the COVID-19 pandemic has a significant impact on the dynamic total connectedness of the system compared to other major global events. Second, the COVOL is a receiver of aggregated global ESG while VIX is a major transmitter. Third, based on the stage of economic development for each ESG market, the aggregated developed-country ESG group plays a more dominant role in the transmission channel. Fourth, based on aggregated ESG markets by region, the VIX is the primary transmitter to four regional ESGs. Last, European ESG market has low connectedness with the major volatility indexes and other regional ESGs. These findings have important and practical implications for investors and portfolio managers in formulating effective risk management strategies for ESG-related investments.

Keywords: Sustainable investments; ESG; COVOL; COVID-19; Connectedness (search for similar items in EconPapers)
JEL-codes: C32 C5 F3 G11 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007944

DOI: 10.1016/j.irfa.2024.103862

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