Kestler N, Scholz H (2023)
Publication Language: English
Publication Type: Other publication type
Publication year: 2023
In this paper, we examine the performance of sustainable stock indices. Our primary
objective is to investigate whether these indices exhibit a performance difference before
and after their inception. According to previous literature we expect an outperformance
in the pre-inception period and/or a subsequent performance decline after inception
for certain categories of indices. In our empirical analysis, we distinguish between
ESG labelled indices and sustainability related indices perform several performance
tests. Our results show a pattern of outperformance in the pre-inception period for all
index categories. This outperformance is then followed by a performance decline in the
period after inception by some certain types of categorized indices i.e. Smart-Beta-ESG
and Thematic-ESG Indices. Thus investors should be careful when comparing index
performance. Especially index performance might not be an inappropriate indication of
performance, hence investor should act with caution when selecting certain sustainable
ETFs.
APA:
Kestler, N., & Scholz, H. (2023). Backtesting bias in sustainable stock indices.
MLA:
Kestler, Niklas, and Hendrik Scholz. Backtesting bias in sustainable stock indices. 2023.
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