Permutation Tests for Stock Index Performance: Evidence from ESG Indices

Hübel B, Scholz H, Webersinke N (2022)

Publication Language: English

Publication Type: Other publication type

Publication year: 2022

DOI: 10.2139/ssrn.3528309

Abstract

The ongoing shift towards sustainable asset management fuels the demand for stock indices with improved ESG profiles. Such indices exhibit different performance metrics and risk characteristics compared to their conventional parent indices. At first sight, it might be tempting to assume that their improved ESG profiles cause the main differences. We introduce Monte Carlo permutation tests and apply them to two S&P 500 ESG indices and find, however, that claims about ESG ratings impacting index performance metrics are not supported by our results. We observe that the better ESG profiles of these indices go hand in hand with exposures to small or value companies, depending on the index construction. Thus, it is essential for investors to adequately assess the methodologies used in constructing ESG indices to make expedient investment and benchmark decisions.

Authors with CRIS profile

Benjamin Hübel Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken Hendrik Scholz Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken Nicolas Webersinke Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken

Related research project(s)

None - None

How to cite

APA:

Hübel, B., Scholz, H., & Webersinke, N. (2022). Permutation Tests for Stock Index Performance: Evidence from ESG Indices.

MLA:

Hübel, Benjamin, Hendrik Scholz, and Nicolas Webersinke. Permutation Tests for Stock Index Performance: Evidence from ESG Indices. 2022.

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