The spillover and leverage effects of ethical exchange traded fund

Abstract

Using the Exponentially Generalized AutoRegressive Conditional Heteroscedasticity-AutoRegressive Moving Average (EGARCH-ARMA) model, there are no differences in terms of the spillover of returns from volatilities and leverage effects between ethical and non-ethical Exchange Traded Funds (ETFs) against benchmark indexes after applying negative ethical screening on ETFs. The lagged ethical ETF returns unilaterally influence current stock index returns or the bilateral relationships between them. This article sheds new light on the selection process involved in ethical ETFs and may provide clues for fund managers as they reward investors who prefer ethical value investments.