The resilience of ethical assets against different uncertainty shocks

Abstract

The focus of this research is to examine the safe-haven properties of seven ethical and conventional asset classes using two sophisticated techniques: quantile coherence and Wavelet coherence. We analyze data ranging from October 3, 2011, to September 30, 2021, that encapsulates several global risk events. The results exhibit either positive or neutral associations between most assets and the Geopolitical Risk (GPR), indicating their safe haven capabilities against the GPR shocks. Notably, the coherence observed between the Economic Policy Uncertainty (EPU) and these assets reveals a positive correlation during bearish markets (monthly frequency) and normal and bullish markets (weekly frequency). Furthermore, only the S&P Green Bond (SPGRNB) as well as S&P Global Clean Energy (SPCE) indices demonstrate protective attributes against EPU shocks during COVID-19. Conversely, market volatility (VIX) was found to negatively impact all asset classes except SPGRNB, which indicates the non-idiosyncratic nature of VIX shocks. Consequently, investors and fund managers operating in ethical markets may consider optimizing their portfolios to shield their wealth amidst instances of extreme and enduring shocks.

Keywords

• JEL Code: C22
• D81
• G11
• G15