Market efficiency of traditional stock market indices and social responsible indices: the role of sustainability reporting

  • Received April 5, 2017;
    Accepted April 25, 2017;
    Published June 2, 2017
  • Author(s)
    Henry Mynhardt ,
    Inna Makarenko
    ORCID Researcher ID ,
    E-mail:
    Alex Plastun
    ORCID Researcher ID
  • DOI
    http://dx.doi.org/10.21511/imfi.14(2).2017.09
  • Article Info
    Volume 14 2017, Issue #2, pp. 94-106
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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Corporate social responsibility, disclosed in sustainability reporting, influences the financial performance of companies. As a result, traditional stock market indices (TI) are expanded with the social responsible stock market indices (SRI). The aim of this study was to establish whether there are any differences in the behavior of the TI and SRI. To do this, the authors analyzed their efficiency. They used R/S analysis to calculate the Hurst exponent as a measure of persistence (long-term memory property). The presence of persistence was evidence in favor of less efficiency. According to empirical results, SRI has lower efficiency, in particular the Dow Jones Sustainability Index. Lower efficiency was also observed in the emerging markets with a responsible investment segment, compared to the traditional stock market indices. Further standardization and a common methodological approach to corporate sustainability reporting disclosure are proposed.

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    • Table 1. Indices of sustainable development and the corresponding financial indices studied by the authors
    • Table 2. Overall results of the Hurst exponent calculations for the Dow Jones Sustainability Indices and traditional Dow Jones Industrial Index
    • Table 3. Overall results of the Hurst exponent calculations for the S&P500 Environmental & Socially Responsible Index and traditional S&P500 Index
    • Table 4. Overall results of the Hurst exponent calculations for the FTSE4Good Global Index and traditional FTSE 100 Index
    • Table 5. Overall results of the Hurst exponent calculations for the MSCI ESG Indices, NASDAQ OMX CRD Global Sustainability Index and their traditional analogues (MSCI Index and NASDAQ Composite Index)
    • Table 6. Behavior of sustainability and traditional indices during pre-crisis, crisis and post-crisis periods: case of global financial crisis
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