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Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms


Oberndorfer, Ulrich; Schmidt, Peter; Wagner, Marcus; Ziegler, Andreas (2013). Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms. Journal of Environmental Economics and Management, 66(3):497-509.

Abstract

This paper empirically analyzes the effect of the inclusion of German corporations in the Dow Jones STOXX Sustainability Index (DJSI STOXX) and the Dow Jones Sustainability World Index (DJSI World) on stock performance. In order to receive robust estimation results, we apply an (short-term) event study approach that is based on both a modern asset pricing model, namely the three-factor model according to Fama and French [24], and additionally a t-GARCH(1,1) model. Our empirical results suggest that stock markets may penalize the inclusion of a firm in sustainability stock indexes. This finding is mainly driven by a strongly negative effect of the inclusion in the DJSI World. In contrast, we do not find significant average cumulative abnormal returns for the inclusion in the DJSI STOXX. This suggests that the inclusion in a more visible sustainability stock index may have larger negative impacts.

Abstract

This paper empirically analyzes the effect of the inclusion of German corporations in the Dow Jones STOXX Sustainability Index (DJSI STOXX) and the Dow Jones Sustainability World Index (DJSI World) on stock performance. In order to receive robust estimation results, we apply an (short-term) event study approach that is based on both a modern asset pricing model, namely the three-factor model according to Fama and French [24], and additionally a t-GARCH(1,1) model. Our empirical results suggest that stock markets may penalize the inclusion of a firm in sustainability stock indexes. This finding is mainly driven by a strongly negative effect of the inclusion in the DJSI World. In contrast, we do not find significant average cumulative abnormal returns for the inclusion in the DJSI STOXX. This suggests that the inclusion in a more visible sustainability stock index may have larger negative impacts.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Economics and Econometrics
Physical Sciences > Management, Monitoring, Policy and Law
Scope:Discipline-based scholarship (basic research)
Language:English
Date:November 2013
Deposited On:24 Oct 2022 14:46
Last Modified:21 Jun 2024 03:33
Publisher:Elsevier
ISSN:0095-0696
OA Status:Closed
Free access at:Related URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.jeem.2013.04.005
Related URLs:https://www.zora.uzh.ch/id/eprint/49083/
Other Identification Number:merlin-id:22860