Abstract
There is a growing demand for sustainable business practices and for sustainable and impact investment as has been signaled by the Sustainable Development Goals ratified by all the United Nations members. However, there is not that much evidence on how sustainable investments perform during crises compared to regular investments. This paper investigates if sustainable investments within the NASDAQ have a lower volatility rate when reacting to a significant global crisis such as the COVID-19 pandemic. It groups the shares of businesses with Corporate Social Responsibility (CSR) practices that are ranked 70% or higher given by CSRHub, Inc. and compares it to business shares with the lowest-ranked CSR business practices at 30% or lower. The top 30% and bottom 30% CSR stocks’ volatility will be predicted using variations of the GARCH model. The top 30% CSR stocks of the NASDAQ had a lower rate of volatility for a global crisis than the bottom 30% CSR stocks. Technology is the only sector whose top 30% showed higher volatility. However, the top 30% of companies in the Health Care and Utilities sectors show a higher increase in returns and a lower drop in returns. These results signal the higher uncertainty associated with some cutting-edge products and services offered by the top 30% of technology companies and the preference for more established companies that offer higher quality services when it comes to satisfying basic needs such as health and utilities in difficult times.
Highlights
A global pandemic has brought new meaning to risk in the modern world of investing.COVID-19 [1], known as SARS-Cov-2, was declared a global pandemic [2], on March11th, 2020, by the World Health Organization [3] (p. 157)
This paper investigates if sustainable investments within the NASDAQ have a lower volatility rate when reacting to a significant global crisis such as the COVID-19 pandemic
The purpose of this paper is to identify the areas in the markets where there is less uncertainty in Corporate Social Responsibility (CSR) stocks during a financial crisis, which was brought about by the global pandemic
Summary
A global pandemic has brought new meaning to risk in the modern world of investing.COVID-19 [1], known as SARS-Cov-2, was declared a global pandemic [2], on March11th, 2020, by the World Health Organization [3] (p. 157). A global pandemic has brought new meaning to risk in the modern world of investing. COVID-19 [1], known as SARS-Cov-2, was declared a global pandemic [2], on March. Most countries were not prepared for the spread of COVID-19, which was defined as a “super spread” based on the outbreak’s rapid pace [4] Industries in many different sectors suffered from either a supply shock or a demand shock. These shocks, historically low interest rates, and many other factors led economists to speculate that there would be a global recession due to the pandemic [5]
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