Co-movement dynamics of sustainability indices: investigating the diversification opportunities through FTSE4Good index family and Borsa Istanbul sustainability index

Purpose This study aims to investigate the international portfolio diversification opportunities provided by Turkish sustainable firms to international socially responsible investors. Design/methodology/approach The Borsa Istanbul Sustainability Index (XUSRD) and FTSE4Good index family daily data for the period of 11/04/2014-12/31/2017 is used and the DCC-GARCH model is applied to explore the dynamic correlation linkages. Findings The results indicate that co-movements between XUSRD and FTSE4Good indices are time-varying and generally display a low level. While the highest average conditional correlation value was observed between XUSRD and Developed 100 index, the lowest one was between XUSRD and FTSE4Good Japan index. Originality/value Although the conventional stock market indices are widely examined in terms of their time-variant relationship, there are only a few studies in the literature focusing on sustainability indices. Socially responsible investments (SRI) are emerging as a new trend, and these investments are also in need of international portfolio diversification. Therefore, this study is expected to fill a gap in the SRI literature.