Risk-return and Volatility analysis of Sustainability Index in India

S. Sudha ()

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2015, vol. 17, issue 6, 1329-1342

Abstract: Companies screened for their superior performance in environmental, social and governance (ESG) parameters comprise the sustainability index introduced at global as well as national stock exchanges. This study not only compares the performance of the sustainability index of India—the S&P ESG India Index with two broad market indexes, viz., the Nifty and the S&P CNX 500 using daily index data—but also analyses the inherent conditional volatility using generalised autoregressive conditional heteroscedasticity models. The results indicate that though the daily compounded returns to the ESG India Index are not statistically different from those of the Nifty or those of the CNX 500, annualised returns of the ESG India Index have been better than the returns of the other two indexes. Thus, focussing on environmental and social sustainability is a win–win situation for companies, investors and the society at large. There is significant volatility clustering in all the three indexes. The ESG India Index has been less volatile compared with the Nifty during the period. These results have corporate implications to focus on ESG parameters seriously in order to benefit from its sensitivity in the stock markets. It also reflects upon investor acceptance and potential for growth of socially responsible investments in India. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Sustainability index (S&P ESG India Index); Socially responsible investing; Capital asset pricing model; Risk-return analysis; Volatility; GARCH models; G1; C580 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s10668-014-9608-8

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