Multi-frequency information transmission among constituents and global equity returns: a sustainable and conventional way of investing

Abstract

PurposeThis study investigates information flow of market constituents and global indices at multi-frequencies.Design/methodology/approachThe study’s findings were obtained using the Improved Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (I-CEEMDAN)-based cluster analysis executed for Rényi effective transfer entropy (RETE).FindingsThe authors find that significant negative information flows among sustainability equities (SEs) and conventional equities (CEs) at most multi-frequencies, which exacerbates diversification benefits. The information flows are mostly bi-directional, highlighting the importance of stock markets' constituents and their global indices in portfolio construction.Research limitations/implicationsThe authors advocate that both SE and CE markets are mostly heterogeneous, revealing some levels of markets inefficiencies.Originality/valueThe empirical literature on CEs is replete with several dynamics, revealing their returns behaviour for diversification purposes, leaving very little to know about the returns behaviour of SE. Wherein, an avalanche of several initiatives on Corporate Social Responsibility (CSR) enjoin firms to operate socially responsible, but investors need to have a clear reason to remain sustainable into the foreseeable future period. Accordingly, the humble desire of investors is the formation of a well-diversified portfolio and would highly demand stocks to the extent that they form a reliable portfolio, especially, amid SEs and/or CEs.

Conditional effects of local and global risk factors on the co-movements between economic growth and inflation: Insights into G8 economies

“…Accordingly, the roles of exchange rate and interest rate can be factored to contribute to the understanding of the macroeconomic modelling. Considering the rapid fluctuations in financial time series leading to their nonlinearities, analyses can also be performed using robust decomposition techniques coupled with the quantification of the amount of information that flows through the macroeconomic variables [ [76] , [77] , [78] , [79] , [80] , [81] , [82] ]. The sample period is limited to August 2021 due to limited data availability for some variables for the G8 nations but enough for the subject matter to be investigated.…”