COMPARING THE EFFICIENCY OF SOCIALLY RESPONSIBLE INDICES ACROSS DEVELOPED AND EMERGING MARKETS: TESTING THE WEAK FORM OF EFFICIENT MARKET HYPOTHESIS

Abstract

The increasing ethical concerns after the 2008 financial crisis and companies' increasing practice of corporate social responsibility, carbon credit, and sustainability have led to the formation of socially responsible indices (SRIs) by countries such as the US and European nations. The objective of this empirical study published in the International Journal of Accounting & Finance Review is to test the weak form of market efficiency hypothesis on SRIs and determine whether they are random compared to traditional indices. The study selected 14 countries, including developed and developing ones, to test the randomness of SRIs and their benchmark indices. However, the study found a lack of publicly available data published for more than five years to test randomness even on countries with SRIs. Therefore, the study concluded that additional research is needed to investigate the potential benefits of investing in SRI. The study provides a research framework based on the weak form of market efficiency hypothesis to test the randomness of SRIs and their benchmark indices, including carbon, green, ESG, etc., formed based on themes such as carbon emission, social sustainability, environmental awareness, and governmental performance.