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Is Nifty ESG Index a Safer Investment Option-An Analysis of Volatility and Volatility Clustering
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Abstract
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Institutional Theory and Resource-based view explain how the external environment may force businesses to adopt specific practices and how ESG can result in value creation, serving as inspiration for the current study. The Institutional Theory & Resource-based view states that legitimacy, ethics, and productivity are crucial pillars for accomplishing business goals and can lead to creation of resources leading to competitive advantages. Based on these claims, the paper postulated that the ESG Index is less risky, which would indicate that the ESG Index is less volatile. This study is being carried out into two parts. Firstly range-bound volatility estimates viz, 'Parkinson', 'Garman-Klass', 'Roger-Satchell', 'Yang, and Zhang' have been used to determine the realised volatility of the Nifty ESG Index across two distinct time horizons and compared with the Nifty 100 to determine the riskiness. Secondly, the volatility dynamics of the Nifty ESG Index was examined for clustering effect using GARCH. The findings show that, in comparison to the Nifty 100, the Nifty ESG 100 Index is more volatile in the long-run but less volatile in the short run. However, the Nifty ESG Index has shown a moderately strong GARCH effect, indicating persistent volatility and volatility clustering. The findings are compatible with all market phenomena and other research, and they complement one another.
Keywords:
Nifty-ESG
Range-bound volatility estimators
GARCH
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