Do Investors Care About Sustainability?

Purpose: This study seeks to investigate any significant changes in the stock returns of companies listed on the BIST Sustainability Index from 2014 to 2023. Within this framework, the research analyses the impact of inclusion in the index on investor behaviour, focusing on potential increases or decreases in stock returns to evaluate the market's reception of sustainability-oriented indices.Method: This study employs an event study methodology to assess the impact of a specific event—the inclusion of companies in an index—on stock returns. The analysis evaluates investor reactions by calculating abnormal returns during both pre- and post-event periods. To determine if there is a significant difference between the average abnormal returns in these periods, a paired sample t-test is utilized. This analysis will indicate whether inclusion in the index results in a change in stock performance.Findings: The analysis results indicate that the cumulative average abnormal returns (CAAR) of 18 companies exhibit a negative trend in the period from 10 to 5 days before and 10 to 5 days after their inclusion in the BIST sustainability index. The findings from the Paired Samples t-test reveal no significant change in stock returns when comparing the CARs values before and after the event.Conclusion: This indicates that there is no noticeable change in stock returns following the inclusion of companies in the BIST Sustainability Index. This scenario may also imply that investors do not react to the inclusion of these companies or that they are unable to achieve abnormal returns from these stocks.