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<p>This study employs multiple GARCH techniques to model the volatility of returns for the FTSE4Good USA index and eleven sectoral stock indices of the United States' main trading partners. A VAR framework is then constructed to examine the volatility spillover effect of the FTSE4Good USA index on sectoral stock indices in Canada, the United Kingdom, and Japan. The study indicates that the US sustainability index has considerable and varied spillover effects to different international markets, depending on the country and sector. In the very beginning, during the first 15&#xa0;days, the spillovers are most remarkable, with real estate and healthcare sectors showing high sensitivity. The results demonstrate that environmental, social, and governance elements are controlling the transference of market volatility across borders. At the same time, they provide an important understanding to the investors and decision-makers in their different roles related to international portfolio risk management and financial stability in a global economy that is getting more integrated and interconnected. These findings suggest that environmental, social, and governance-driven volatility transmission is not uniform but mediated by sectoral environmental, social, and governance alignment, domestic regulatory environments, and investor behavior. The study contributes to the sustainable finance literature by demonstrating how sustainability benchmarks influence cross-border market linkages beyond traditional financial factors.</p>

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Evaluating the spillover effects of FTSE4Good USA index: a sectoral analysis of United States international trade partners

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年3月26日

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  • Salman Almutawa,
  • Jayendira P. Sankar

摘要

This study employs multiple GARCH techniques to model the volatility of returns for the FTSE4Good USA index and eleven sectoral stock indices of the United States' main trading partners. A VAR framework is then constructed to examine the volatility spillover effect of the FTSE4Good USA index on sectoral stock indices in Canada, the United Kingdom, and Japan. The study indicates that the US sustainability index has considerable and varied spillover effects to different international markets, depending on the country and sector. In the very beginning, during the first 15 days, the spillovers are most remarkable, with real estate and healthcare sectors showing high sensitivity. The results demonstrate that environmental, social, and governance elements are controlling the transference of market volatility across borders. At the same time, they provide an important understanding to the investors and decision-makers in their different roles related to international portfolio risk management and financial stability in a global economy that is getting more integrated and interconnected. These findings suggest that environmental, social, and governance-driven volatility transmission is not uniform but mediated by sectoral environmental, social, and governance alignment, domestic regulatory environments, and investor behavior. The study contributes to the sustainable finance literature by demonstrating how sustainability benchmarks influence cross-border market linkages beyond traditional financial factors.