Environmental Investment Versus Traditional Investment: Alternative or Redundant Pathways?

Considering the short- and long-term equilibrium between indices, the present article analyses the relationship of two segments of stock markets: environmentally sustainable investment and traditional indices. We used Johansen cointegration tests and a multivariate model of conditioned heteroscedasticity on seven stock indices: five corresponding to segments of environmental investment, namely, regarding alternative energy, clean technology, green building, sustainable water, and pollution prevention, and two indices representative of traditional stock market segments, whose philosophy is based on a purely financial logic. The period considered was 8 years. Our result shows that in the long term, the pattern of behaviour of environmental indices differed from traditional indices, and no equilibrium relationships were identified. In the short term, the two groups of indices reported very similar behaviour, with the daily dynamics being determined fundamentally by cross-market factors.