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Long-run memory in ethical and conventional investments. Novel evidence from a VAR(1)-FIEGARCH model

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Abstract

Within a VAR(1)-FIEGARCH framework, we explore the dynamic impact of uncertainty as measured by US Economic Policy Uncertainty Index on the level of fractional integration of ethical investments and conventional investments for Europe, the American and Asia-Pacific market. Our results reveal that both spillovers and policy uncertainty appear to capture a significant part of the returns fractional integration process for ethical and conventional investments. Overall, our results support the view that ethical and conventional investments returns conform to a fractionally integrated process. Our results entail significant policy implications for investors who seek profitable trading strategies.

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Notes

  1. We use a novel FIEGARCH model as the original one which has been developed by Bollerslev and Mikkelsen (1996), taking into account bad and good news in the same philosophy. Thus, we have constructed our FIEGARCH model, combining the following two models; the EGARCH and the FIGARCH frameworks. In this way, we have a similar one model as the original FIEGARCH model and this is augmented with policy uncertainty and error spillovers in order to test the validity of our baseline results.

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Authors and Affiliations

  1. Department of Balkan, Slavic and Oriental Studies, University of Macedonia, Egnatia 156, 54006, Thessaloniki, Greece

    Athanasios Koulakiotis

  2. Department of Accounting & Finance, University of Peloponnese, Antikalamos, 24100, Kalamata, Greece

    Vassilios Babalos

  3. Department of International and European Studies, University of Macedonia, Egnatia 156, 54006, Thessaloniki, Greece

    Apostolos Kiohos

  4. Department of Economics, International Hellenic University, Terma Magnisias, 62124, Serres, Greece

    Maria I. Kyriakou

Authors
  1. Athanasios Koulakiotis
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  2. Vassilios Babalos
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  3. Apostolos Kiohos
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  4. Maria I. Kyriakou
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Correspondence to Athanasios Koulakiotis.

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Appendix

Appendix

Table 1 Fractional integration convergence for ethical indexes
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Table 2 Chi-squared (1) values of Fractional Integration Convergence for Ethical Indexes
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Table 3 Fractional Integration Convergence for Conventional Indexes
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Table 4 Chi-squared (1) values of Fractional Integration Convergence for Conventional Indexes
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Fig. 1
figure 1

Ethical indexes performance

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Fig. 2
figure 2

Conventional indexes performance

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Fig. 3
figure 3

The combined regional performance for ethical and conventional market indexes.

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Koulakiotis, A., Babalos, V., Kiohos, A. et al. Long-run memory in ethical and conventional investments. Novel evidence from a VAR(1)-FIEGARCH model. J Econ Finan 44, 563–569 (2020). https://doi.org/10.1007/s12197-019-09502-7

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  • DOI: https://doi.org/10.1007/s12197-019-09502-7

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