Resilience or returns: Assessing green equity index performance across market regimes

An Thi Thuy Duong

International Review of Economics & Finance, 2025, vol. 97, issue C

Abstract: Amid growing concerns about climate change and sustainable development, this study examines the performance of green equity indices versus conventional indices in various market regimes from 2002 to 2024. By incorporating both developed and emerging markets and utilizing the Markov regime-switching model, this paper offers a dynamic perspective on index performance across varying market regimes. The findings reveal that green indices in developed markets demonstrate resilience, with lower or comparable volatility, less negative returns during downturns, and longer durations in both bearish and bullish regimes compared to conventional indices. In developing markets, green indices generally exhibit higher volatility and mixed performance. This research highlights the importance of tailoring sustainable investment strategies and policies to regional market condition, enriching the understanding of the global sustainable investment landscape. This study emphasizes the potential of green investments to enhance financial stability, corporate innovation, and climate governance practices.

Keywords: Green equity index; Resilience; Returns; Volatility; Markov regime switching model (search for similar items in EconPapers)
JEL-codes: G1 G11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:97:y:2025:i:c:s1059056024008232

DOI: 10.1016/j.iref.2024.103831

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