Liudmyla Huliaieva
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ESG vs conventional indices: Comparing efficiency in the Ukrainian stock market
Alex Plastun , Inna Makarenko , Liudmyla Huliaieva , Tetiana Guzenko , Iryna Shalyhina doi: http://dx.doi.org/10.21511/imfi.20(2).2023.01Investment Management and Financial Innovations Volume 20, 2023 Issue #2 pp. 1-15
Views: 854 Downloads: 279 TO CITE АНОТАЦІЯThis paper explores market efficiency in the Ukrainian stock market to determine whether there are differences between traditional and ESG indices. Different data properties related to market efficiency are explored: persistence (R/S analysis is used for these purposes), stationarity (ADF tests), normality (Kolmogorov-Smirnoff, Anderson-Darling test, etc.), resistance to market anomalies (Day of the week effect, abnormal returns and patterns they generate are tested using parametrical and non-parametrical statistical tests), etc. Database includes daily data from 2 conventional Ukrainian stock market indices (UX and PFTS) and ESG index (WIG Ukraine) over the period 2015–2022. The following hypothesis is tested in this paper: ESG indices are more efficient than traditional ones. The findings suggest that there are no significant differences between traditional and ESG indices: they have the same persistence, stationarity, do not fit normal distribution and are not influenced by explored market anomalies. So, despite the fact that companies listed in the ESG index are more transparent and thus characterized by lower information asymmetry, they are more liquid and popular among investors, ESG index is not more efficient than traditional ones. This might be the result of unfair practices called “washing” aimed at signaling the active ESG involvement with actual absence of it. This means that many ESG companies are actually traditional. To prevent such practices, the ESG reporting regulation needs to be revised.
Acknowledgment
Alex Plastun gratefully acknowledges financial support from the Ministry of Education and Science of Ukraine (0121U100473).
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