• Adrian (Wai Kong) Cheung Adrian (Wai Kong) Cheung
  • Eduardo Roca Eduardo Roca

We examine the impact on returns, risk and liquidity of stocks in the Asia Pacific markets when included into and deleted from the Dow Jones Sustaibility World Index over the period 2002-2010. Using an event study methodology, we test five existing hypotheses and two new ones, called the "sustaibility taste hypothesis" and "sustaibility redundancy hypothesis", which we developed. Consistent with the "sustaibility redundancy hypothesis", we find that both index addition and index deletion stocks experience a significant decline in returns, an increase in trading volume, no change in systematic risk and an increase in idiosyncratic risk. This indicates that sustaibility matters to Asia Pacific investors, although in a somewhat negative manner.