Sustainability and Ethics in the Process of Price Determination in Financial Markets: A Conceptual Analysis

Abstract

This paper explores how financial markets can support the practical applicability of Sustainability Development Goals (SDGs) principles and why ethics has a central role in this process. The efficient market hypothesis holds that a financial market is efficient when prices equate value. Extending this assertion to sustainability, it can be said that prices should become equal to sustainable value. Prices can be regarded as the addition of the present value of future expectations and the impact of short-term volatility. This property parallels the existence of two different types of shareholders: long-run shareholders, who are often involved in the management of the corporation, and short-run shareholders, who usually apply speculative strategies to the choice of their investments. The SGDs' principles are logically thought for a long-run horizon. Their impact on corporate value stems mainly from the changes they introduce in environmental and social risk, apart from becoming a potential source of innovation. Nevertheless, their effects on the short-run perspective can be very small unless either market traders assume sustainability as a goal of their own or the sustainability effects are incorporated into prices. We hold that the second issue is safer and preferable. Both involve ethics: the former would require that investors perform any trade from an ethical perspective. The latter needs that the ethical emphasis is placed on the process of price determination. The achievement of this goal demands a wide display of information on sustainability, placed together with financial information, and appropriate regulation. Its analysis considers the principles of behavioral finance.

Scoping the Evolution of Corporate Social Responsibility (CSR) Research in the Sustainable Development Goals (SDGs) Era

“…Other scholars adopted an employee-focused lens that highlights the importance of decent working conditions for employees [79], especially gender issues in the workplace [80]. Finally, some used an investor-focused lens that explores the role of responsible investors in achieving the SDGs [81]. The majority of the articles in this theme (24 articles) covered SDGs in a generic sense.…”

“…More attention should be given to the role of stakeholders in achieving effective implementation of the goals across the globe. It is argued that the SDGs are "macro-ethics" where individual ethics represent a main building block of its achievement and success [81]. A likely research question can examine the ethical behavior of individuals that highly support or discourage the path to sustainable development.…”

Pembentukan Portofolio Optimal Dengan Menggunakan Model Indeks Tunggal

“…tPada tsaat tpermintaan tsaham tmeningkat, tmaka tharga tsaham tersebut takan tcenderung tmeningkat. tSebaliknya, tpada tsaat tbanyak torang menjual tsaham, tmaka tharga tsaham ttersebut tcenderung takan tmengalami penurunan t (Bosch-Badia et al, 2018) Tujuan tutama tseorang tinvestor tmelakukan tinvestasi tadalah tuntuk mendapatkan treturn. tReturn tmerupakan thasil tyang tdiperoleh tdari tinvestasi (Abramov et al, 2015).…”

Efficiency of the Public Pensions Funds on the Socially Responsible Equities of Mexico

“…Also, some Hinduist and Buddhist precepts have been considered to decide in which economic activities are more appropriate to invest in. Departing from those moral and religious practices, there are some documented records [7][8][9] that suggest that the Puritans or the Muslim people have a specific screening process to determine what type of activities to invest in or to finance [7,10,11]. In the decade of the 1970's, SRI started in the United States as a form of activist investing in order to make a negative screening process of the stocks of companies involved in weapon production or supplies for the U.S. war in Vietnam [7].…”

“…Also, our position is to contribute to the literature that propose to include an SRI only screening in the optimal portfolio selection process as is the case of [10,[38][39][40] and to the literature that review the investment selection and price formation due to SRI [7][8][9]26,[41][42][43]. Also, we want to extend the previous work of SRI in emerging countries, such as Mexico, by following the review made by Valencia [44].…”