Modelling Environmental Risk

Suhejla Hoti (), Michael McAleer and Laurent Pauwels

No 08-2004, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: As environmental issues have become increasingly important in economic research and policy for sustainable development, firms in the private sector have introduced environmental and social issues in conducting their business activities. Such behaviour is tracked by the Dow Jones Sustainable Indexes (DJSI) through financial market indexes that are derived from the Dow Jones Global Indexes. The sustainability activities of firms are assessed using criteria in three areas, namely economic, environmental and social. Risk (or uncertainty) is analysed empirically through the use of conditional volatility models of investment in sustainability-driven firms that are selected through the DJSI. The empirical analysis is based on financial econometric models to determine the underlying conditional volatility, with the estimates showing that there is strong evidence of volatility clustering, short and long run persistence of shocks to the index returns, and asymmetric leverage between positive and negative shocks to returns.

Keywords: Environmental sustainability index; environmental risk; conditional volatility; Dow Jones Sustainability Indexes; GARCH; GJR; persistence; shocks; asymmetry; moment condition; log-moment condition. (search for similar items in EconPapers)
Pages: 23
Date: 2004-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published in Environmental Modelling and Software, Volume 20, 2005, pages 191-216

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP08-2004.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:gii:giihei:heiwp08-2004

Access Statistics for this paper

More papers in IHEID Working Papers from Economics Section, The Graduate Institute of International Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dorina Dobre ().