Multi-frequency information transmission among constituents and global equity returns: a sustainable and conventional way of investing

Emmanuel Asafo-Adjei, Anokye M. Adam, Peterson Owusu Junior, Clement Lamboi Arthur and Baba Adibura Seidu

European Journal of Management and Business Economics, 2023, vol. 35, issue 1, 31-61

Abstract: PurposeThis study investigates information flow of market constituents and global indices at multi-frequencies.Design/methodology/approachThe study’s findings were obtained using the Improved Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (I-CEEMDAN)-based cluster analysis executed for Rényi effective transfer entropy (RETE).FindingsThe authors find that significant negative information flows among sustainability equities (SEs) and conventional equities (CEs) at most multi-frequencies, which exacerbates diversification benefits. The information flows are mostly bi-directional, highlighting the importance of stock markets' constituents and their global indices in portfolio construction.Research limitations/implicationsThe authors advocate that both SE and CE markets are mostly heterogeneous, revealing some levels of markets inefficiencies.Originality/valueThe empirical literature on CEs is replete with several dynamics, revealing their returns behaviour for diversification purposes, leaving very little to know about the returns behaviour of SE. Wherein, an avalanche of several initiatives on Corporate Social Responsibility (CSR) enjoin firms to operate socially responsible, but investors need to have a clear reason to remain sustainable into the foreseeable future period. Accordingly, the humble desire of investors is the formation of a well-diversified portfolio and would highly demand stocks to the extent that they form a reliable portfolio, especially, amid SEs and/or CEs.

Keywords: Entropy; Mutual information; Decomposition; Sustainable responsible investing; Frequency-dependent (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/ejmbe/article/35/1/31/1249 ... n-transmission-among (text/html)
https://www.emerald.com/ejmbe/article-pdf/35/1/31/ ... e-05-2022-0126en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ejmbep:ejmbe-05-2022-0126

DOI: 10.1108/EJMBE-05-2022-0126

Access Statistics for this article

European Journal of Management and Business Economics is currently edited by Enrique Bigne

More articles in European Journal of Management and Business Economics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().