Return and risk spillovers between the ESG global index and stock markets: Evidence from time and frequency analysis

KILIÇ Y., Destek M. A., Cevik E. I., Bugan M. F., Korkmaz O., Dibooglu S.

Borsa Istanbul Review, cilt.22, 2022 (SSCI) identifier

  • Yayın Türü: Makale / Derleme
  • Cilt numarası: 22
  • Basım Tarihi: 2022
  • Doi Numarası: 10.1016/j.bir.2022.11.015
  • Dergi Adı: Borsa Istanbul Review
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Anahtar Kelimeler: ESG investing, Portfolio diversification, Stock markets, Wavelet coherence analysis
  • Akdeniz Üniversitesi Adresli: Evet

Özet

© 2022 Borsa Ä°stanbul Anonim ÅžirketiIn this paper, we examine comovements between stock market returns and investments that take into account Environmental, Social, and Governance (ESG) factors by studying the interconnections between the two returns in time and frequency space. We study interdependencies between the conventional stock market and ESG stocks using daily data from 2007 to 2021 for 19 developing and 19 developed countries. Our results show significant comovement patterns between ESG returns and stock returns at various frequencies, time scales, and sample episodes in all countries, particularly during periods of financial turmoil. For the most part, we document positive (in-phase) comovements between the stock returns and ESG returns in developing countries and negative (out-of-phase) comovements in developed countries. This implies limited portfolio gains from adding ESG stocks to portfolio diversification in developing countries but significant gains in developed countries.