Is Quantile Connectedness Flexible or Uniform Under Catastrophic Tenure? Insights into ESG Investing and Financial Markets in the Quad Nations

Abstract This paper unfolds the quantile connectedness of the ESG investing index with the financial markets. The stock market is considered a representation of the broader financial markets. We use the FlexShares STOXX US ESG Select Index Fund (ESG) as a proxy for the ESG investing index. In contrast, the stock exchanges of each country, such as those in the USA, Japan, Australia, and India, are considered proxies for their respective stock markets. The daily observation of the examined markets extended from 31 December 2019 to 16 January 2023. Quantile vector autoregression (QVAR) is employed to investigate the connectedness at different quantiles. The dynamic linkages among the examined markets scatter at different quantiles, as they are not uniform. The low quantile is spotted with the highest connectedness, followed by the upper and middle quantiles. Additionally, the ESG investing index and the Japanese stock market dominate each quantile in terms of connectedness. This study offers valuable insights for investors, fund managers, and policy analysts.