Title: Performance analysis of sustainable stock indices against conventional ones: an empirical investigation of G7 countries

Authors: Neha Seth; Deepti Singh

Addresses: School of Management Studies, Indira Gandhi National Open University, New Delhi, India ' Department of Business Administration, School of Business and Commerce, Manipal University Jaipur, Jaipur, Rajasthan, India

Abstract: The study evaluates the performance of sustainable indices in comparison to conventional indices of G7 countries for the period starting from 1st January 2015 to 30th September 2022. The article employs risk-adjusted measures such as Sharpe, Treynor, Jensen's alpha, Modified Sharpe, and Sortino, which shows that sustainable indices of most countries like Canada, Japan, Germany, and Italy highlighted superior performance and the investors earned positive rewards for bearing incremental risk. However, the stressed time of crisis is proved to be a penalty for socially ethical investors. The Fama Decomposition model shows that premium rewards earned by sustainable indices helped the superior-performing countries to secure top ranks. The conditional volatility of sustainable index is measured using the GARCH(1,1) model. The study will benefit the investors to diversify their investments in sustainable indices to earn creditable returns and the financial market professionals in framing policies to uplift the investment in sustainable indices.

Keywords: sustainable stock indices; performance evaluation; risk-adjusted measures; Fama decomposition; G7; GARCH; conventional indices; MSCI.

DOI: 10.1504/GBER.2025.144233

Global Business and Economics Review, 2025 Vol.32 No.2, pp.109 - 133

Received: 20 Dec 2022
Accepted: 08 Jul 2023
Published online: 03 Feb 2025 *

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