Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

The Spillover Waves Of Sustainable Finance

Johnson, Felix LU and Rettig, Jonna LU (2024) NEKH03 20232
Department of Economics
Abstract
The recent increase in popularity of the financial instrument Exchange Traded Fund (ETF) and sustainable investments has pushed financial research in the direction of long-term and viable investing. When researching sustainable finance, factors like Environmental, Social, and Governance (ESG) are commonly studied to determine whether an investment is considered “sustainable” or not. This paper intends to examine the presence of any spillover effects of volatility between low ESG-rated ETFs and high ESG-rated ETFs across various day spans, in order to provide insight into the behavior of these assets. The ESG rating tool used to determine the sustainability rating of the ETFs is produced by Morningstar Sustainability Rating. The study uses... (More)
The recent increase in popularity of the financial instrument Exchange Traded Fund (ETF) and sustainable investments has pushed financial research in the direction of long-term and viable investing. When researching sustainable finance, factors like Environmental, Social, and Governance (ESG) are commonly studied to determine whether an investment is considered “sustainable” or not. This paper intends to examine the presence of any spillover effects of volatility between low ESG-rated ETFs and high ESG-rated ETFs across various day spans, in order to provide insight into the behavior of these assets. The ESG rating tool used to determine the sustainability rating of the ETFs is produced by Morningstar Sustainability Rating. The study uses daily price data of ten different ETFs which are divided into two groups of five, one with a Morningstar sustainability rating of 5 globes and one with a rating of 1 globes. The methodology used in the study is Granger causality testing on Vector Autoregressive (VAR) Models. Different lag orders were applied to each test, resulting in additional ground to conclude from. The verdict of this study suggests that the high ESG-rated ETFs displayed less spillover effects than the low ESG-rated ETFs. Several factors are behind these findings including investor behavior, attitude towards risk, and fund management practices. (Less)
Please use this url to cite or link to this publication:
author
Johnson, Felix LU and Rettig, Jonna LU
supervisor
organization
course
NEKH03 20232
year
type
M2 - Bachelor Degree
subject
keywords
ESG-rated Exchange Traded Funds
language
English
id
9148181
date added to LUP
2024-04-16 09:29:36
date last changed
2024-04-16 09:29:36
@misc{9148181,
  abstract     = {{The recent increase in popularity of the financial instrument Exchange Traded Fund (ETF) and sustainable investments has pushed financial research in the direction of long-term and viable investing. When researching sustainable finance, factors like Environmental, Social, and Governance (ESG) are commonly studied to determine whether an investment is considered “sustainable” or not. This paper intends to examine the presence of any spillover effects of volatility between low ESG-rated ETFs and high ESG-rated ETFs across various day spans, in order to provide insight into the behavior of these assets. The ESG rating tool used to determine the sustainability rating of the ETFs is produced by Morningstar Sustainability Rating. The study uses daily price data of ten different ETFs which are divided into two groups of five, one with a Morningstar sustainability rating of 5 globes and one with a rating of 1 globes. The methodology used in the study is Granger causality testing on Vector Autoregressive (VAR) Models. Different lag orders were applied to each test, resulting in additional ground to conclude from. The verdict of this study suggests that the high ESG-rated ETFs displayed less spillover effects than the low ESG-rated ETFs. Several factors are behind these findings including investor behavior, attitude towards risk, and fund management practices.}},
  author       = {{Johnson, Felix and Rettig, Jonna}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Spillover Waves Of Sustainable Finance}},
  year         = {{2024}},
}