The impact of ESG news on the volatility of the Portuguese stock market: Does it change during recessions?

Cássio Zanatto, Margarida Catalão-Lopes, Joaquim P. Pina, Inês Carrilho-Nunes

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)
73 Downloads (Pure)

Abstract

This paper assesses how environmental, social, and governance (ESG) news influence Portuguese stock market volatility depending on the business cycle. Given the lack of an adequate index to capture the effects of ESG media on the Portuguese stock market, a News Sentiment Index is developed. This index, which captures positive and negative ESG news on companies listed in the Portuguese Stock Index (PSI-20), is then used as an external regressor in symmetric and asymmetric GARCH-type models employed to model the stock market volatility. Results show that during non-crisis periods ESG news reduce returns' volatility, and that when considering the period preceding the financial crisis the disclosure content (positive or negative) of the news matter. However, during economic downturns, neither the amount nor the content disclosure of ESG news affect volatility; thus, ESG preoccupations might no longer be paramount.
Original languageEnglish
Pages (from-to)5821-5832
Number of pages12
JournalBusiness Strategy And The Environment
Volume32
Issue number8
Early online date15 May 2023
DOIs
Publication statusPublished - Dec 2023

Keywords

  • business cycle
  • ESG
  • GARCH
  • PSI-20
  • stock returns volatility

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