A POSSIBLE PREDICTIVE CAUSALITY BETWEEN THE NEW GLOBAL TREND, ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) AND MARKET SENTIMENT THROUGH “GOLD FUTURES/VIX” RATIO

SERBU Razvan Sorin, Lucian Blaga University of Sibiu

IANCU Adrian-Nicolae, Lucian Blaga University of Sibiu

ROTAR Eugen, Lucian Blaga University of Sibiu

Abstract:
The increasing recognition by investors of the importance of environmental, social, and governance (ESG) factors in decision-making has led to a growing interconnection between sustainability and the financial market. The paper presents an engaging correlation between the ratio of two instruments, Gold Futures and Chicago Board Options Exchange Volatility Index (VIX), both associated with market sentiment and S&P 500 ESG Index from Chicago Board Options Exchange. The aim of the research is to find whether there is a precedence effect or predictive causality between the variables mentioned above and the goal is to help determine inflection points on S&P 500 ESG Index evolution more precisely and to see if changes in Gold Futures/VIX ratio, an indicator of changes in market sentiment can impact S&P 500 ESG Index, a market-cap-weighted index with broad coverage created to gauge the performance of securities that meet sustainability criteria, while maintaining similar overall industry group weights as the S&P 500. This ESG index aims to provide a comprehensive measure of sustainability-focused investment opportunities that are aligned with the broader market, enabling investors to diversify their portfolios while investing in sustainable companies. The methodology used to construct the index ensures that the industry group weights of the sustainability index are similar those of the S&P 500, allowing for easy comparisons between the two. Overall, this research explores the relations between market sentiments, indexes, and achieving sustainability objectives while also meeting investors financial goals.

Keywords: sustainability, financial market, gold futures, Granger causality, ESG Index

JEL Classification: A12, C58, E44, Q56

Volume: 74, Issue: 4

Pages: 91 - 99

Publication date: December, 2022

DOI: 10.56043/reveco-2022-0040

Download the article: http://economice.ulbsibiu.ro/revista.economica/archive/74409serbu&iancu&rotar.pdf

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