International Journal of Business and Economics Volume 18, No. 2 September, 2019

Are there Really Long-Run Diversification Benefits from Sustainable Investments?

Nicholas Apergis

Department of Law and Social Sciences, University of Derby, UK

Vassilios Babalos

Department of Accounting and Finance, University of Peloponnese, Greece

Christina Christou

Department of Economics and Management, Open University of Cyprus, Cyprus

Rangan Gupta

Department of Economics, University of Pretoria, South Africa

Abstract

Socially responsible investments have turned into popular investment vehicles over the last decade. By employing a standard cointegration methodology along with a novel time-varying quantile cointegration approach, this paper estimates whether the U.S. Dow Jones Sustainability Index (DJSI) and its conventional counterpart are integrated. The results confirm the presence of an asymmetric long-run relationship between the two indices that is not picked up by the standard methodology of cointegration, rendering the cointegrating relationship to be quantile-dependent. Similar results appear for the world and European sustainability indices relative to their conventional counterparts, implying the robustness of our approach. These findings place any long-run diversification benefits under scrutiny and contain significant implications for international market participants.

Keywords：Socially responsible investments, quantile cointegration, diversification benefits.

JEL Classifications：C5, G1, Q5.

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