Forecasting the Quantile Connectedness: Insight From Global CSR and Sustainability Indices

ABSTRACT This paper forecasts the quantile connectedness among Global CSR and Sustainable Indices, considering daily prices extending from December 30, 2019 to March 27, 2024. Even if both CSR indices and sustainability indices assess companies on nonfinancial performance, they partially differ in scope and focus. Where corporate social responsibility (CSR) indexes primarily evaluate how businesses fulfill their ethical and social responsibilities, emphasizing aspects such as corporate governance, labor practices, community engagement, sustainability indices take a broader, long‐term view, assessing how companies align with sustainable development goals (SDGs), manage risks, and produce resilience. The examined indices are based on the above distinction and respond accordingly in terms of their prices. To capture both CSR and sustainable indices, four stocks of each based on market capitalization are considered. For the empirical computation, quantile vector autoregression (QVAR) is employed. The results reveal a high connectedness among the examined markets in the lower, middle, and upper quantiles. In addition, the financial shocks due to natural and man‐made outbreaks do not impair the interconnectedness among the examined indices. Further, the S&P_TSX Renewable Energy and Cl (RSPRECTI) indices showed the least transmission of the shock in lower and middle quantile, which may be preferred by investors and portfolio managers in their portfolio baskets. This article offers practical implications to markets' investors and stakeholders.