Sustainable stock market indices: A comparative assessment of performance

The paper focuses on the sustainability stock market indices and investigates whether there is evidence of synchronization between the price return provided by sustainability indices calculated for various geographic regions. Due to data availability constraints, the analysis had been performed only for the Dow Jones Sustainability Indices family, which comprises six types of indices. It had been considered the daily price return time series recorded in the last 10 years (November 30, 2010 – July 26, 2019) by each of the six Dow Jones Sustainability Indices, and it had been applied to the Principal Components Analysis method. Our findings confirm the initial research assumption that sustainability indices build for certain geographical areas are more correlated and hence more synchronized than others. More specifically, sustainability indices which include companies from Europe, Japan, US, World developed countries and World best-in-class exhibit correlated price returns, and hence are synchronized while DJSI for emerging countries is far apart. Therefore, the first five categories of indices may act as a substitute for each other. A second conclusion is that both emerging markets' sustainability index and any of the five indices may be included in investors’ portfolios for purposes related to risk diversification and hedging