Revisiting conventional and green finance spillover in post-COVID world: Evidence from robust econometric models

Gagan Sharma (), Tapan Sarker, Amar Rao, Gaurav Talan and Mansi Jain

Global Finance Journal, 2022, vol. 51, issue C

Abstract: In 2020, ESG funds that invest in companies that score higher on environmental, social, and governance measures witnessed an increase in investment compared to 2019. Understanding the causal relationship and spillover between these two types of indexes may help investors determine if clean energy indexes follow the same trend as conventional indexes or the reverse. Additionally, investors would benefit from understanding this causation in both the pre- and post-Covid-19 eras. We conceive this study to plug this gap and advance the knowledge in this critical area. We study the causality and spillover between NASDAQ clean energy indexes, and their corresponding alternatives namely, NASDAQ Composite Index and NASDAQ Global Select Market Composite using the daily data and from 1 st January 2011 to 29 th June 2021. We apply the Granger-Causality test and the spillover models approach by Diebold and Yilmaz (2012) and Baruník and Křehlík (2018) to determine any medium-run, or long-run causality, and spillover between the indexes under reference, respectively. Our results suggest us to observe that both sustainable and green indexes exhibit bi-directional causality where both sets of indexes impact each other in the long-run. Additionally, after the emergence of the COVID-19 pandemic, the connectivity between the two sets of indices rose significantly. Our findings also suggest that the investors will not lose on risk-adjusted returns if they chose to go green. With the investors' ability to shift towards green investment without losing on financial returns, it shall become even easier for businesses to steer their operations.

Keywords: Wavelet coherence; Granger-causality; COVID-19; Green finance; Sustainable indexes; Traditional indexes (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:51:y:2022:i:c:s1044028321000892

DOI: 10.1016/j.gfj.2021.100691

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