Sustainability membership and stock price: an empirical study using the Morningstar-SRI Index

This paper investigates how investors evaluate a membership of sustainability index. By using the data on the Morningstar Socially Responsible Investment Index from 2003 to 2010, we estimate the impact of inclusion on and exclusion from the Index on the stock price. Result shows that the inclusion on the Index was evaluated significantly positively, while the removal from the Index did not lead to a significant drop in share prices. We also found that the average cumulative abnormal returns were negative in the earlier years but positive in later years. This could be due to change in appreciation of the concept of corporate social responsibility by investors throughout the years.