Title: Modelling connectedness and diversification among socially responsible investments in Asia

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 investigates the cointegration and volatility interdependence among sustainable indices of emerging Asian countries by employing Johansen's cointegration, Granger causality test and dynamic conditional correlation (DCC) GARCH model. The analysis reveals no long-run relationship among these indices, and all the indices are significantly affected by their lagged values. The results also present that past shocks and volatility have a significant role in the present volatility of the sustainable indices. However, past volatility has more impact, which lasts with stronger persistence. The significant DCC terms infer that volatility spillover exists between sustainable Asian markets. The study also calculated optimal portfolio weights to provide better diversification opportunities to minimise the risks without hampering the potential returns. The study suggests that long-term investors may earn profit by adding these non-integrated sustainable indices to their portfolios, but they must diversify and hedge to safeguard from losses during economic and financial turmoil.

Keywords: volatility spillover; Johansen's cointegration; DCC-GARCH; sustainable stock index; optimal portfolio weights; emerging Asia.

DOI: 10.1504/IJSE.2025.145276

International Journal of Sustainable Economy, 2025 Vol.17 No.2, pp.123 - 146

Received: 28 Jul 2023
Accepted: 30 Sep 2023
Published online: 31 Mar 2025 *

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