Mas e ’s Deg ee P og am in
S a is ics and In o ma ion Managemen
UNDERSTANDING THE RELATIONSHIP BETWEEN IMPACT
INVESTMENT FIRMS AND MARKET VOLATILITY
An analysis o Eu opean Impac Fi ms amids COVID-19 and Ongoing
Con lic
Fábio Alexand e Al es de Sousa
Mas e Thesis
p esen ed as pa ial equi emen o ob aining he Mas e ’s Deg ee in S a is ics and In o ma ion Managemen
NOVA In o ma ion Managemen School
Ins i u o Supe io de Es a ís ica e Ges ão de In o mação
Uni e sidade No a de Lisboa
NOVA In o ma ion Managemen School
Ins i u o Supe io de Es a ís ica e Ges ão de In o mação
Uni e sidade No a de Lisboa
UNDERSTANDING THE RELATIONSHIP BETWEEN IMPACT INVESTMENT FIRMS AND
MARKET VOLATILITY
An analysis o Eu opean Impac Fi ms amids COVID-19 and Ongoing Con lic
by
Fábio Alexand e Al es de Sousa
Mas e Thesis p esen ed as pa ial equi emen o ob aining he Mas e ’s deg ee in S a is ics
and In o ma ion Managemen , wi h a specializa ion in Risk Analysis and Managemen
Supe ised by
A shin Asho eh, PhD, NOVA In o ma ion Managemen School
July, 2024
i
STATEMENT OF INTEGRITY
I he eby decla e ha ing conduc ed his academic wo k wi h in eg i y. I con i m ha I ha e no
used plagia ism o any o m o undue use o in o ma ion o alsi ica ion o esul s along he
p ocess leading o i s elabo a ion. I u he decla e ha I ha e ully acknowledged he Rules
o Conduc and Code o Hono om he NOVA In o ma ion Managemen School.
[Lisbon, July 15, 2024]
ii
DEDICATION
This hesis is dedica ed o he many people who suppo ed and encou aged me h oughou
his jou ney.
To my gi l iend, whose uncondi ional suppo p o ided me wi h he s eng h and mo i a ion
I needed du ing he mos s ess ul imes. You unde s anding and pa ience we e in aluable.
To my pa en s, o hei suppo and encou agemen , allowing me o pu sue my educa ion
and ollow my d eams. You sac i ices and belie in me ha e made his achie emen possible.
To my amily and iends, o hei companionship and o helping me ake b eaks and dis ac
mysel om he s ess o hesis wo k. You suppo kep me g ounded and balanced.
To my colleagues and he company, I wo ked wi h du ing his p ocess, o p o iding he
en i onmen and condi ions ha enabled me o comple e his wo k.
To my ellow mas e 's s uden s, o hei in aluable assis ance and sha ed knowledge. You
help and iendship made his jou ney mo e manageable and enjoyable.
Finally, o my supe iso , o hei guidance, suppo , and expe ise h oughou his p ocess.
Thank you all o you signi ican con ibu ions o his achie emen .
iii
ABSTRACT
The pas decade has been ma ked by signi ican social and acial inequali ies, global con lic s,
clima e challenges, and he ongoing epe cussions o he COVID-19 pandemic. Amid hese
issues, he g ow h and de elopmen o impac in es ing signal a subs an ial shi in he
in es men landscape, sugges ing a p omising u u e whe e in es men s ha d i e posi i e
social and en i onmen al change will be c ucial in add essing majo global p oblems. Despi e
he apid e olu ion o impac in es ing, exis ing esea ch on he inancial pe o mance and
isk associa ed wi h hese in es men s p esen s a a ie y o pe spec i es. This pape employs
Dynamic Condi ional Co ela ion GARCH modelling o analyse he ime- a ying ola ili y and
co ela ion dynamics be ween Eu opean Impac Fi ms and Eu opean ma ke e e ence
indices, including he STOXX Eu ope 600 Index and ola ili y indices such as he EURO STOXX
50 Vola ili y and DAX-New Vola ili y Indices. The analysis is conduc ed ac oss h ee dis inc
pe iods: p e-COVID-19, du ing COVID-19, and he pandemic-wa pe iod, encompassing he
pandemic and he ongoing con lic . Ou indings sugges po en ial sho - e m di e si ica ion
and isk-hedging bene i s o EU impac i ms, while long- e m ola ili y con agion highligh s
he subs an ial and pe sis en impac o ma ke ola ili y on hese i ms o e ex ended
pe iods.
KEYWORDS
Impac in es ing; Vola ili y; COVID-19; Di e si ica ion; DCC-GARCH model
Sus ainable De elopmen Goals (SDG):

i
TABLE OF CONTENTS
1. In oduc ion .................................................................................................................. 1
2. Li e a u e e iew .......................................................................................................... 4
2.1. Can impac in es men s be jus i ied h ough a sa e-ha en, isk hedging and
di e si ica ion ole? ........................................................................................................... 4
2.2. Do impac in es men s show esilience du ing c isis pe iods? ............................ 6
3. Da a and Me hodology ................................................................................................. 8
3.1. Da a Collec ion ...................................................................................................... 8
3.1.1. Sc eening Impac Fi ms .................................................................................. 8
3.1.2. Cons uc ing ou Impac In es ing Index ..................................................... 10
3.1.3. B oade Ma ke and Vola ili y Indices ......................................................... 11
3.2. Me hodology ....................................................................................................... 12
3.2.1. Exponen ially weigh ed mo ing a e age (EWMA) ....................................... 12
3.2.2. Dynamic Condi ional Co ela ion (DCC) GARCH........................................... 13
3.2.3. Copula Dynamic Condi ional Co ela ion GARCH ........................................ 15
4. Empi ical S udy ........................................................................................................... 17
5. Resul s and discussion ................................................................................................ 26
Sho - e m ola ili y con agion be ween Eu opean impac i ms and Eu opean ma ke ’s
ola ili y (V2TX/V1XI) ...................................................................................................... 28
Long- e m ola ili y con agion be ween Eu opean impac i ms and Eu opean ma ke ’s
ola ili y (V2TX/V1XI) ...................................................................................................... 29
Sho - e m ola ili y con agion be ween Eu opean impac i ms and Eu opean ma ke ’s
benchma k (STOXX) ......................................................................................................... 31
Long- e m ola ili y con agion be ween Eu opean impac i ms and Eu opean ma ke ’s
benchma k (STOXX) ......................................................................................................... 32
6. Conclusions and u u e wo ks .................................................................................... 37
Bibliog aphical Re e ences .............................................................................................. 39
Appendix A ...................................................................................................................... 44
Appendix B ...................................................................................................................... 50
Appendix C ...................................................................................................................... 52
Appendix D ...................................................................................................................... 53
Appendix E ....................................................................................................................... 55
LIST OF FIGURES
Figu e 1 - P ices and alues o Impac In es ing Fi ms Index (IIFX) , STOXX Eu ope 600 Index
(STOXX), and he wo ma ke ola ili y indices (V2TX and V1XI) om Janua y 4, 2016, and
Ma ch 27, 2024. ............................................................................................................... 17
Figu e 2 - Log Re u ns o Impac In es ing Fi ms Index (IIFX) , STOXX Eu ope 600 Index (STOXX),
and he wo ma ke ola ili y indices (V2TX and V1XI) om Janua y 5, 2016, and Ma ch
27, 2024. ........................................................................................................................... 18
Figu e 3 - Sca e plo o e u ns be ween Impac In es ing Fi ms Index (IIFX) and STOXX Eu ope
600 Index (STOXX), and he wo ma ke ola ili y indices (V2TX and V1XI) om Janua y 5,
2016, and Ma ch 27, 2024. .............................................................................................. 19
Figu e 4 - Rolling co a iances and co ela ions be ween he Impac In es ing Fi ms Index (IIFX)
and STOXX Eu ope 600 Index (STOXX), and he wo ma ke ola ili y indices (V2TX and
V1XI), using di e en ime windows. ............................................................................... 23
Figu e 5 - EWMA co a iances and co ela ions be ween he Impac In es ing Fi ms Index (IIFX)
and STOXX Eu ope 600 Index (STOXX), and he wo ma ke ola ili y indices (V2TX and
V1XI), using di e en ime windows. ............................................................................... 24
Figu e 6 – Dynamic Condi ional Co ela ion (DCC) be ween he Impac In es ing Fi ms Index
(IIFX) and he h ee b oade ma ke (STOXX) and ola ili y indices (V2TX and V1XI) om
Janua y 5, 2016, o Ma ch 27, 2024. ................................................................................ 34
Figu e B1 - Au oco ela ion unc ion (ACF) o he ou e u n se ies (𝑦𝑡): Impac In es ing
Fi ms Index (IIFX), STOXX Eu ope 600 EUR P ice Index (STOXX), EURO STOXX 50 Vola ili y
(VSTOXX) EUR P ice Index (V2TX), and DAX-New Vola ili y Index (V1XI) ........................ 50
Figu e B2 - Au oco ela ion unc ion (ACF) o he ou e u n se ies as powe o 2 (𝑦𝑡2): Impac
In es ing Fi ms Index (IIFX), STOXX Eu ope 600 EUR P ice Index (STOXX), EURO STOXX 50
Vola ili y (VSTOXX) EUR P ice Index (V2TX), and DAX-New Vola ili y Index (V1XI) ......... 51
Figu e D1 - Dynamic Condi ional Co ela ion (DCC) be ween he Impac In es ing Fi ms Index
(IIFX) and he h ee b oade ma ke (STOXX) and ola ili y indices (V2TX and V1XI) om
Janua y 5, 2016, o Janua y 23, 2020 (P e-COVID-19 pe iod). ........................................ 53
i
Figu e D2 - Dynamic Condi ional Co ela ion (DCC) be ween he Impac In es ing Fi ms Index
(IIFX) and he h ee b oade ma ke (STOXX) and ola ili y indices (V2TX and V1XI) om
Janua y 24, 2020, o May 05, 2023 (Du ing COVID-19 pe iod). ....................................... 54
Figu e D3 - Dynamic Condi ional Co ela ion (DCC) be ween he Impac In es ing Fi ms Index
(IIFX) and he h ee b oade ma ke (STOXX) and ola ili y indices (V2TX and V1XI) om
Janua y 24, 2020, o Ma ch 27, 2024 (Pandemic-Wa pe iod). ....................................... 54
LIST OF TABLES
Table 1 - Impac in es ing i ms’ dis ibu ion o impac a eas ................................................ 10
Table 2 - Summa y s a is ics on indices’ daily e u n se ies, Janua y 5, 2016, o Ma ch 27, 2024.
.......................................................................................................................................... 20
Table 3 - P elimina y e idence o uncondi ional co ela ion .................................................. 22
Table 4 - Es ima ion esul s o DCC-GARCH model .................................................................. 27
Table 5 - Es ima ion esul s o Copula-DCC-GARCH model ..................................................... 33
Table C1 - Maximum likelihood es ima ion o uni a ia e GARCH model ............................. 52
Table E1 - In o ma ion C i e ia, Log-likelihood, MSE and RMSE o mul i a ia e GARCH models
wi h m -dis ibu ion o IIFX-STOXX se ies .................................................................... 55
Table E2 - In o ma ion C i e ia, Log-likelihood, MSE and RMSE o mul i a ia e GARCH models
wi h m -dis ibu ion o IIFX-V2TX se ies ...................................................................... 56
Table E3 - In o ma ion C i e ia, Log-likelihood, MSE and RMSE o mul i a ia e GARCH models
wi h m -dis ibu ion o IIFX-V1IX se ies ....................................................................... 57
LIST OF ABBREVIATIONS AND ACRONYMS
IF Impac Fi ms
IIFX Impac In es ing Fi ms Index
STOXX STOXX Eu ope 600 EUR P ice Index
V2TX EURO STOXX 50 Vola ili y (VSTOXX) EUR P ice Index
V1XI DAX-New Vola ili y Index
DCC Dynamic Condi ional Co ela ion
GARCH Gene alized Au o eg essi e Condi ional He e oskedas ici y
1
1. INTRODUCTION
Impac in es ing has e ol ed om a niche concep o a widely adop ed in es men app oach.
In es o s a e inc easingly aligning hei inancial goals wi h posi i e social and en i onmen al
ou comes (Höchs äd e & Scheck, 2015). Ea ly pionee s, such as he Global Impac In es ing
Ne wo k (GIIN), we e among he ea ly isiona ies behind wha we now ecognize as impac
in es ing. The GIIN de ines impac in es ing as “in es men s made wi h he in en ion o
gene a e measu able posi i e social and en i onmen al impac alongside inancial e u ns,
and speci ically use ha in es men capi al along wi h engagemen o in es men e ms o
posi i ely in luence a ge ed impac esul s.” This in en ionali y di e en ia es impac
in es ing om pu ely inancially-mo i a ed in es men s.
The apid g ow h o he impac in es ing ma ke is e lec ed in he subs an ial inc ease in
asse s unde managemen , which ha e isen om $95 billion in 2017 o $213 billion by he
end o 2022. This su ge indica es a p omising ajec o y, sugges ing ha impac in es men s
will play a c ucial ole in add essing some o he wo ld's mos p essing challenges in he yea s
o come (Hand e al., 2023).
Howe e , despi e he quick expansion o he impac in es ing landscape, he e is s ill a lack o
su icien li e a u e on he opic (see, Chiappini e al., 2023 and Miglia acca e al., 2022).
Ques ions emain a ound he de ini ion o impac in es ing and how i di e s om ela ed
concep s like socially esponsible in es ing (SRI). Cla i ying hese bounda ies is essen ial o a
be e unde s anding and applica ion o impac in es ing.
Exis ing esea ch has con ibu ed o a clea e delinea ion o impac in es ing, and o a clea
delinea ion o bounda ies o b oade concep s like socially esponsible in es ing (Höchs äd e
& Scheck, 2015). I is commonly pe cei ed as ei he di e en om o o go beyond ela ed
concep s like socially esponsible in es ing. The easons a e ha while impac in es o s seek
o und p ojec s wi h posi i e and measu able socie al and en i onmen al goals, and a e open
o accep ing ade-o s be ween hose social and also inancial goals (Ba be e al., 2021),
socially esponsible in es o s o en ocus on En i onmen al, Social and Go e nance (ESG)
c i e ia o imp o e co po a e p ac ices, he eby enhancing inancial pe o mance h ough
epu a ion. Some companies may mis ep esen social and en i onmen al impac o po ay
hemsel es as “pu pose-led b ands” (Mo duch & Ogden, 2019).
Geczy e al. (2021) delinea ed he con ac ual and go e nance p ac ices inhe en in impac
in es ing, emphasizing he delica e balance equi ed be ween inancial objec i es and social-
bene i goals. In a complemen a y s udy, Bu on e al. (2021) del ed in o he cha ac e is ics
o impac in es o s, de ining hem as indi iduals o en i ies wi h a dual manda e o gene a ing
social good and inancial e u ns. These in es o s me iculously selec companies ha
demons a e a capaci y o deli e signi ican social alue, o en main aining highe equi y
s akes in such en e p ises (Chowdh y e al., 2019).
8
3. DATA AND METHODOLOGY
3.1. DATA COLLECTION
3.1.1. SCREENING IMPACT FIRMS
To be eligible o impac in es men s, he i m's p oduc and mission should a ge speci ic
social o en i onmen al ou comes, such as con ibu ing o educe po e y and hunge ,
imp o e he quali y o educa ion and p o ide clean wa e and sani a ion. Ano he common
s a egy is o in es in companies wi h posi i e impac h ough hei ope a ional p ac ices.
This in ol es selec ing companies ha demons a e esponsible and sus ainable business
p ac ices in hei day- o-day ope a ions, such as educing hei ca bon oo p in , p omo ing
ai labou p ac ices, o implemen ing en i onmen ally iendly policies (Hand e al., 2020).
Accessing he igh da a and me ics o impac in es ing is a big challenge. E en hough e o s
ha e been made o help make da a mo e a ailable, mos s udies on impac in es men s s ill
ely on p i a e da a. P i a e impac unds, especially, end o keep hei in es men da a o
hemsel es. And when hey do sha e, hey o en lea e ou any in es men s ha didn' do well,
which makes hei o e all pe o mance look be e han i migh be (Wa s & Scales, 2020).
Hence, o see i impac in es men s can be jus i ied h ough a sa e-ha en, isk-hedging, and
di e si ica ion ole, and i hey do show esilience du ing c isis pe iods, we me iculously
ga he ed a unique da ase om a selec ion o EU lis ed companies. These companies p ima ily
ocus on add essing a ious social and en i onmen al challenges ou lined in he Uni ed
Na ions Sus ainable De elopmen Goals (SDGs). The SDGs, comp ising 17 goals ha add ess a
wide a ay o sus ainable de elopmen issues, se e as a globally ecognized amewo k o
de ining impac a eas, e lec ing a consensus among s akeholde s on ambi ious de elopmen
objec i es. Impac in es o s inc easingly a ou ed companies whose o e ings align wi h a
leas one SDG, using hem as a benchma k o es ablish impac pe o mance goals, as
highligh ed in GIIN's epo (Hand e al., 2020). Consequen ly, companies a e op ing o
inco po a e SDGs in o hei non- inancial disclosu es (Pizzi e al., 2022).
Following a simila selec ion p ocess o Giacomini e al. (2023) , we ini ia ed ou s udy by
selec ing companies lis ed in he wikiposi i e.o g da abase, which ea u ed close o 800
companies globally by he end o Ap il 2024. F om his ex ensi e da abase, we speci ically
ocused on EU-lis ed companies, na owing down he selec ion o jus o e 200 companies.
Subsequen ly, we go ano he lis o companies by u ilizing Re ini i Sc eene and applying
wo il e s: ESG nega i e sc eening AND alignmen wi h a leas one Sus ainable De elopmen
Goal (SDG). I used web sc aping o e ie e a able o company names om he
wikiposi i e.o g da abase, whe e each name included a hype link o addi ional de ails abou
he company. By ollowing each link, I ga he ed speci ic in o ma ion, such as he ISIN code,
allowing me o c oss- e e ence bo h lis s ISIN codes o iden i y which ones mee ou s udy
c i e ia. Finally, by conduc ing sea ches on each company’s websi e, we sc u inize hei co e

9
business desc ip ions o pinpoin i ms explici ly commi ed o social and en i onmen al
sus ainabili y h ough hei p oduc s o se ices. This comp ehensi e app oach enabled us o
include companies dedica ed o posi i e social and en i onmen al impac , while also
conside ing ESG c i e ia and SDG alignmen , ensu ing a comp ehensi e and obus analysis o
impac in es men s in ou esea ch.
This me iculous sc eening p ocess yields ou inal sample comp ising 55 EU impac i ms
(he ea e , IF) spanning he pe iod om beginning 2016 o Ma ch 2024. The size o ou sample
e lec s he niche na u e o impac in es ing compa ed o mo e adi ional ESG and socially
esponsible in es men s. As p e iously men ioned, Be nal e al. (2021) examined he public
equi y ma ke in Eu ope, analysing a sample o only 16 lis ed i ms. Ou da ase , which
includes 55 Eu opean impac i ms, ma ks a no able ad ancemen compa ed o hei s udy.
Appendix A p o ides a comp ehensi e lis o companies included in his s udy along wi h
desc ip ions o hei p ima y business ac i i ies. These companies showcase a di e se ange
o impac ocuses. While some p io i ize sus ainable echnology, in as uc u e, o
cons uc ion, o he s may concen a e on heal hca e, educa ion, o en i onmen al
conse a ion. Fu he mo e, ou analysis does no include companies in he banking o
go e nmen sec o s which p e en s egula o y in luences om biasing ou esul s.
To ca ego ize hese 55 impac i ms ac oss each impac goal, we ha e es ablished i e impac
ca ego ies ollowing he ecommenda ions o MSCI ESG Resea ch, which o e s a amewo k
encompassing all SDGs. Table 1 illus a es he dis ibu ion o he 55 companies ac oss hese
impac ca ego ies. The Empowe men ca ego y ep esen s he smalles segmen , accoun ing
o 6% o he i ms. In con as , Na u al Capi al eme ges as he mos p e alen ca ego y,
comp ising 38.2%, ollowed by Basic Needs and Clima e Change, each ep esen ing 21.8%.
10
Table 1 - Impac in es ing i ms’ dis ibu ion o impac a eas
Impac a eas SDGs Numbe Pe cen
Basic needs
No po e y, Ze o Hunge , Good
Heal h and Well-Being, Clean Wa e
and Sani a ion, Sus ainable Ci ies and
Communi ies
12
21,8%
Clima e Change A o dable and Clean Ene gy, Clima e
Ac ion 12
21,8%
Empowe men
Quali y Educa ion, Gende Equali y,
Decen Wo k and Economic G ow h,
Reduced Inequali ies, Indus y,
Inno a ion, and In as uc u e
10
18,2%
Na u e Capi al
Sus ainable Consump ion and
P oduc ion, Li e on Land, Li e Below
Wa e
21
38,2%
Go e nance Peace, Jus ice and S ong Ins i u ions,
Pa ne ship 0
0,0%
To al 55
100,0%
3.1.2. CONSTRUCTING OUR IMPACT INVESTING INDEX
In o de o cons uc ou Impac In es ing Fi ms Index (he ea e , IIFX), we ga he ed he daily
closing p ices o each o he 55 impac i ms om Janua y 2016 o Ma ch 2024, along wi h
hei ma ke capi aliza ion and ee- loa a e as o Ma ch 2024, using Thomson Reu e s
Da as eam. Fo he index cons uc ion, we adop ed he me hodology employed by STOXX,
u ilizing he STOXX Eu ope 600 as ou benchma k. This comp ehensi e index ep esen s he
pe o mance o he 600 la ges cap companies ac oss 17 Eu opean coun ies, se ing as a
eliable measu e o Eu opean equi y ma ke pe o mance.
The STOXX Eu ope 600 employs a ee- loa ma ke capi aliza ion weigh ing me hodology o
ensu e ha i accu a ely e lec s he po ion o he ma ke a ailable o in es o s o ading.
Each cons i uen 's weigh ing wi hin he index is de e mined by di iding i s ee- loa a e
ma ke capi aliza ion by he sum o all cons i uen s' ee- loa a e ma ke capi aliza ion. The
esul ing weigh o each cons i uen is hen mul iplied by i s sha e p ice o de e mine i s
impac on he o e all index pe o mance.
11
Regula qua e ly e iews a e conduc ed, and du ing he e iew p ocess, he mos ecen ee-
loa da a a ailable o STOXX is u ilized o componen selec ion. This ensu es ha he index
accu a ely e lec s he cu en s a e o he ma ke . Fo ou analysis, we u ilized he mos
ecen ee- loa and ma ke capi aliza ion da a a ailable a he ime o ou analysis, Ma ch
2024. This app oach ensu es ha he index accu a ely e lec s he ma ke landscape a he
end o ou analysis pe iod, aligning wi h indus y s anda ds and bes p ac ices o index
cons uc ion.
I is impo an o no e ha we ha e no inco po a ed adjus men s o co po a e ac ions as
sugges ed by STOXX index me hodology. Co po a e ac ions such as s ock spli s, me ge s,
acquisi ions, o spin-o s can impac he composi ion and weigh ing o he index, bu we ha e
op ed o a simpli ied app oach ha ocuses solely on he ee loa ma ke capi aliza ion o
each company.
3.1.3. BROADER MARKET AND VOLATILITY INDICES
In examining he ela ionship be ween Eu opean impac in es ing i ms and he Eu opean
ma ke , i is impe a i e o es ablish a comp ehensi e unde s anding o he ma ke dynamics.
This en ails a ho ough analysis o key ma ke e e ence indices ha se e as benchma ks o
assessing he pe o mance and ola ili y o Eu opean equi ies.
The STOXX Eu ope 600 index s ands as a p ominen benchma k, encompassing a di e se a ay
o la ge, mid, and small capi aliza ion companies spanning 17 Eu opean coun ies. I s b oad
co e age, ep esen ing app oxima ely 90% o he Eu opean s ock ma ke capi aliza ion,
p o ides i an impo an ool o in es o s seeking insigh s in o he o e all pe o mance o
Eu opean equi ies.
Mo eo e , ola ili y indices such as he EURO STOXX 50 Vola ili y and he DAX-New Vola ili y
Index o e c ucial pe spec i es on ma ke sen imen and isk pe cep ion. The EURO STOXX 50
Vola ili y Index acks he implied ola ili y o op ions on he EURO STOXX 50 Index, p o iding
aluable insigh s in o in es o s' expec a ions ega ding u u e ola ili y wi hin he Eu ozone
ma ke . Simila ly, he DAX-New Vola ili y Index moni o s he implied ola ili y o op ions on
he DAX, shedding ligh on he an icipa ed ola ili y o Ge many's leading blue-chip s ocks.
High le els o he EURO STOXX 50 Vola ili y and DAX-New Vola ili y Indices o en indica e
ma ke s ess, while low le els sugges ma ke calmness.
Implied ola ili y e lec s ma ke expec a ions o u u e p ice mo emen s, de i ed om op ion
p ices. We elied on hese key ma ke e e ence indices o in es iga e he po en ial oles o
impac i ms as sa e-ha en, isk-hedging, and di e si ica ion in he con ex o he Eu opean
ma ke .
12
3.2. METHODOLOGY
To assess he po en ial bene i s o di e si ica ion by including impac asse s in a adi ional
inancial po olio, we analysed he co ela ion o inancial e u ns be ween Eu opean impac
i ms and Eu opean ma ke benchma k indices. Impac in es ing has unde gone signi ican
changes in ecen yea s, so we wan ed o de e mine i he beha iou o impac asse s has
changed, pa icula ly du ing pe iods o ma ke s ess such as he COVID-19 pandemic and i s
a e ma h, as well as he cu en con ex o geopoli ical ensions in Eas e n Eu ope and he
Middle Eas .
3.2.1. EXPONENTIALLY WEIGHTED MOVING AVERAGE (EWMA)
Be o e employing he DCC-GARCH (Dynamic Condi ional Co ela ion - Gene alized
Au o eg essi e Condi ional He e oskedas ici y) model in ou analysis, we i s u ilized he
Exponen ially Weigh ed Mo ing A e age (EWMA) me hod o in es iga e he dynamic
ela ionships be ween he Impac In es ing Fi ms Index (IIFX) and he indices STOXX, V2TX,
and V1XI. The a ionale o using EWMA lies in i s abili y o p o ide a p elimina y
unde s anding o he ime- a ying co a iances and co ela ions wi h less compu a ional
complexi y compa ed o DCC-GARCH. EWMA o e s a clea and in ui i e app oach o ack
changes in he ela ionships o e ime, making i an excellen p ecu so o he mo e
sophis ica ed DCC-GARCH analysis.
The EWMA me hod assigns exponen ially dec easing weigh s o olde obse a ions, allowing
ecen da a o ha e a mo e signi ican impac on he calcula ed a e ages. This weigh ing
scheme is con olled by a smoo hing pa ame e , lambda (λ), se o 0.94.
By using exponen ially dec easing weigh s, he EWMA me hod places mo e emphasis on he
mos ecen obse a ions, which is c ucial in inancial ma ke s whe e ecen e en s o en ha e
a g ea e impac on cu en ma ke condi ions han olde ones. This p ope y makes EWMA
pa icula ly use ul o modelling inancial ime se ies da a, as i allows o a mo e esponsi e
adjus men o changes in ma ke ola ili y and co ela ions.
In ou analysis, we u ilized bo h a sho e window (lambda = 0.94) and a longe window (hal -
li e = 125 days) o he EWMA calcula ions. The sho e window p o ided de ailed insigh s in o
he sho - e m luc ua ions and immedia e impac s o ma ke e en s on he ela ionships. We
also explo ed he use o a longe hal -li e pa ame e , which e ec i ely adjus s lambda o
p o ide a di e en pe spec i e on he da a. This longe window smoo hs ou sho - e m
luc ua ions and highligh s longe - e m ends, p o iding a complemen a y iew o he
s anda d lambda se ing.
By applying EWMA, we aimed o gain p elimina y insigh s in o he dynamic beha iou o he
ela ionships be ween EU impac i ms and he indices be o e mo ing o he mo e complex
and compu a ionally in ensi e DCC-GARCH model. The insigh s ob ained om EWMA analysis
13
se ed as a ounda ion o unde s anding he empo al e olu ion o co a iances and
co ela ions, he eby in o ming and guiding he subsequen DCC-GARCH analysis.
3.2.2. DYNAMIC CONDITIONAL CORRELATION (DCC) GARCH
In his s udy, Dynamic Condi ional Co ela ion GARCH modelling is used o model he ime-
a ying ola ili y and co ela ion dynamics be ween Eu opean impac i ms and Eu opean
ma ke e e ence indices. Unde s anding how hey in e ac is i al as impac in es men
g ows. A e conduc ing se e al s a is ical es s, such as ARCH and ACF es s, we ound ha
he DCC-GARCH model p o ided he bes i o he da a. This inding is u he suppo ed by
p e ious s udies, including Yousa e al. (2022); Be nal e al. (2021); Haq e al. (2021); Saeed
e al. (2020); and Sado sky (2014) , which ha e also demons a ed he e ec i eness o he
DCC-GARCH model in cap u ing he dynamic ela ionships wi hin simila inancial da ase s.
The Dynamic Condi ional Co ela ion GARCH model (DCC-GARCH; Engle, 2002; Engle &
Sheppa d, 2001), in oduced by Engle (2002) , is a powe ul ool o cap u ing ime- a ying
and dynamic ela ionships in mul i a ia e se ings. By combining he GARCH model o
es ima e indi idual asse s' condi ional a iance and he dynamic condi ional co ela ion
model o assess ime- a ying co ela ions, he DCC-GARCH model o e s a comp ehensi e
unde s anding o ola ili y and co ela ion dynamics wi hin inancial ma ke s.
When s udying he ola ili y o inancial ime se ies, esea che s equen ly u n o GARCH, a
me hod ha uses an au o eg essi e amewo k o model a ime se ies' condi ional a iance,
allowing ola ili y shocks o pe sis o e ime. Mul i a ia e GARCH models such as DCC-GARCH
ha e been ex ensi ely used o explo e con agion e ec s be ween ma ke s, p o iding insigh s
in o he in ica e in e connec ions and in e dependencies among a ious asse s (see, o
example, Nguyen e al., 2022; Zhang e al., 2022; Celık, 2012; Ma ens & Poon, 2001).
The DCC-GARCH model ollows a wo-s ep p ocess:
1. Es ima ion o he condi ional a iance (ℎ,) o each a iable, using GARCH(1,1)
model, speci ied in Eqs. (1) and (2).
𝑟 = 𝜇+ 𝜖
( 1 )
ℎ, = 𝜔+ 𝛼𝜀
+ 𝛽ℎ,
( 2 )
whe e, 𝛼 and 𝛽 a e non-nega i e pa ame e s, whe e 𝛼 signi ies sho - e m ola ili y
sensi i i y and 𝛽 deno es long- e m ola ili y pe sis ence. The sum o alpha and be a
coe icien s se es as a measu e o he pe sis ence o ola ili y shocks. This sum is
expec ed o be less han 1, indica ing ha he impac o shocks diminishes o e ime.

14
I he sum exceeds 1, i sugges s ha he shock has an explosi e e ec , pe sis ing
inde ini ely and ampli ying ola ili y.
2. Es ima ion o DCC pa ame e s, o compu e he ime- a ying condi ional co a iance
ma ix 𝐻, which is a unc ion o he condi ional co ela ion ma ix 𝑅 and diagonal
ma ix o ime- a ying s anda d de ia ions 𝐷.
𝐻= 𝐷𝑅𝐷
( 3 )
whe e 𝑅 is he condi ional co ela ion ma ix and 𝐷 ep esen s he diagonal ma ix o
ime- a ying s anda d de ia ions, speci ied in Eqs. (4) and (5).
𝑅= 𝑄
∗𝑄𝑄
∗
( 4 )
𝐷= 𝑑𝑖𝑎𝑔ℎ∙
 
⁄.....ℎ∙
 
⁄
( 5 )
𝑄
∗ is calcula ed as ollows: 𝑄
∗ = (𝑑𝑖𝑎𝑔(𝑄))
.
In his model, he diagonal elemen s o he condi ional co a iance ma ix a e modelled using
uni a ia e GARCH p ocesses, while he o -diagonal elemen s o 𝐻 a e ep esen ed as
nonlinea unc ions o he diagonal e ms and compu ed as:
[𝐻] = ℎ
 
⁄ℎ
 
⁄𝜌,𝑖 ≠ 𝑗
( 6 )
The e o e, he ime- a ying condi ional co ela ion is es ima ed as ollows:
𝜌∙ =𝒬∙
𝒬∙𝒬∙ ,𝑖 ≠ 𝑗
( 7 )
This wo-s ep app oach allows o he modelling o ime- a ying co ela ions in a mul i a ia e
se ing while p ese ing he simplici y o uni a ia e GARCH models o indi idual asse s'
ola ili y.
Mo eo e , we elied on he Maximum Likelihood Es ima ion (MLE) me hod o e alua e model
i , ensu ing ha he pa ame e s we e es ima ed in a way ha maximizes he likelihood. As a
esul , we ound ha he inclusion o ARMA(1,1) componen s enhances he log-likelihood o
ou model, signi ying a be e i o he da a by cap u ing linea dependencies in he mean
15
p ocess ha a plain GARCH model may o e look. While ou e u n se ies 𝑦 is app oxima ely
unco ela ed bu dependen , mo e han 5 lags all ou side he con idence limi s, sugges ing
he p esence o weak se ial co ela ions ha an ARMA model could cap u e. (see, Appendix
B).
𝑟 = 𝜇+ 𝜙𝑟 + 𝜃𝜀 + 𝜀
( 8 )
This inclusion o he au o eg essi e (AR) componen allows he mean equa ion o accoun o
se ial co ela ion in he e u ns, p o iding a mo e accu a e ep esen a ion o he inancial
da a. Addi ionally, he mo ing a e age (MA) componen helps o cap u e he impac o pas
shocks on cu en e u ns. By inco po a ing bo h AR and MA componen s in he ARMA(1,1)
model, we can e ec i ely model he dynamics o he e u ns, allowing o a mo e
comp ehensi e and nuanced unde s anding o he unde lying p ocesses. This combined
app oach helps o educe he esiduals' au oco ela ion, leading o be e pe o mance in
subsequen ola ili y and co ela ion modelling s eps.
Addi ionally, we es ed a ious dis ibu ions o he e o e ms, including he no mal
Gaussian and S uden 's T dis ibu ions (see, Appendix C). Among hese, he S uden 's T
dis ibu ion p o ed o be he mos e ec i e, hus being he one which esul s we decided o
p esen in he s udy.
The S uden 's T dis ibu ion was p e e ed because i accoun s o hea y ails and ex eme
alues, which a e common in inancial da a. This dis ibu ion enhances he model's abili y o
cap u e he isk and ola ili y associa ed wi h inancial e u ns, leading o mo e obus and
ealis ic modelling. By inco po a ing hese elemen s, he model wi h a S uden 's T dis ibu ion
o e s a mo e comp ehensi e unde s anding o he unde lying ma ke dynamics and imp o es
he o e all p edic i e pe o mance o he model.
3.2.3. COPULA DYNAMIC CONDITIONAL CORRELATION GARCH
The Copula-DCC-GARCH me hodology is designed o cap u e he complexi ies o inancial
da a, pa icula ly he skewed, lep oku ic, and asymme ic dependence pa e ns exhibi ed by
asse e u ns. I achie es his by linking uni a ia e ma ginal dis ibu ions o hei mul i a ia e
dis ibu ion h ough copulas, a concep in oduced by Skla (1959) . This app oach allows o
a mo e lexible and accu a e ep esen a ion o he dependencies be ween asse e u ns,
add essing he limi a ions o adi ional models.
The Copula-DCC-GARCH me hodology in ol es a wo-s ep p ocess. Fi s , uni a ia e e u n
dis ibu ions a e es ima ed using GARCH models o cap u e ime- a ying ola ili y. This s ep
ensu es ha he ma ginal dis ibu ions o each asse a e accu a ely modelled. Then, he
condi ional dependence s uc u e is modelled using copulas, inco po a ing dynamic
condi ional co ela ions (DCC) o cap u e ime- a ying co ela ions be ween asse s and
16
ma ke indices (Pa on, 2012, 2006). This s ep e ec i ely cap u es he dynamic
in e dependencies be ween asse s and ma ke condi ions.
The pa ame e s o he Copula-DCC-GARCH model a e es ima ed ia maximum likelihood
es ima ion, a s anda d app oach in inancial econome ics. This ensu es obus ness in
cap u ing he e ol ing ma ke dynamics ac oss di e en pe iods o s abili y and c isis.
17
4. EMPIRICAL STUDY
The da ase used o he en i e sample pe iod has been ca e ully cleaned o ensu e accu acy
and consis ency. Since he companies in he s udy a e om di e en pa s o Eu ope wi h
a ying holidays and da a a ailabili y, i was impo an o add ess any po en ial biases. To
achie e his, any ows wi h missing da a we e excluded. This means ha only days whe e all
companies had comple e da a we e included in he analysis, esul ing in 1852 daily
obse a ions om Janua y 5, 2016, o Ma ch 27, 2024. This me iculous p ocess ensu es ha
he analysis is based on a s anda dized da ase , allowing o ai compa isons and accu a e
e alua ions ac oss all companies. I conduc ed he analysis using R, u ilizing he ollowing
packages: “ se ies”, “Pe o manceAnaly ics”, “quan mod”, “ uga ch”, “ca ”, “FinTS”,
“ mga ch”, “copula”, and “lm es ”. Speci ically, “FinTS” helped jus i y he use o DCC-GARCH,
h ough ARCH e ec es s, “ uga ch” was used o i he uni a ia e GARCH model, and
“ mga ch” allowed o i and e alua e mul i a ia e GARCH models.
Figu e 1 e eals a simila i y in ola ili y be ween EU impac i ms and STOXX, al hough he
la e exhibi s mo e p onounced luc ua ions in p ices, pa icula ly du ing he COVID-19
pandemic pe iod. Bo h indices show simila non-posi i e ela ion wi h he ma ke ola ili y
indices, which had a signi ican peak in hei alues coinciding wi h he COVID-19 pandemic
and e lec ing ma ke expec a ions o u u e p ice mo emen s du ing his ime o heal h c isis.
Figu e 1 - P ices and alues o Impac In es ing Fi ms Index (IIFX) , STOXX Eu ope 600 Index
(STOXX), and he wo ma ke ola ili y indices (V2TX and V1XI) om Janua y 4, 2016, and
Ma ch 27, 2024.
24
and 100-day olling co ela ion, which exhibi g ea e sensi i i y and ola ili y du ing c ises.
The 252-day olling me ics smoo h ou hese luc ua ions, especially du ing he p olonged
pe iods o c isis such as he pandemic and he wa . The IIFX and V1XI analysis ollows a simila
pa e n o he V2TX analysis, wi h a nega i e co ela ion.
Fo IIFX and STOXX, he sho - e m window e eals a ela i ely s able co a iance wi h a
signi ican spike a ound he onse o he COVID-19 pandemic, indica ing a heigh ened
co ela ion du ing his pe iod. The longe window, howe e , smoo hs ou hese sho - e m
luc ua ions, sugges ing p olonged pe iods o highe co a iance du ing he pandemic. The
co ela ion be ween IIFX and STOXX shows luc ua ions a ound a s ong posi i e alue,
Figu e 5 - EWMA co a iances and co ela ions be ween he Impac In es ing Fi ms Index
(IIFX) and STOXX Eu ope 600 Index (STOXX), and he wo ma ke ola ili y indices (V2TX and
V1XI), using di e en ime windows.

25
e ealing a g adual decline since he pandemic, sugges ing a weakening bu s ill signi ican
ela ionship o e ime.
In con as , he analysis o IIFX and V2TX highligh s a mo e ola ile ela ionship. The sho -
e m window displays equen spikes in co a iance du ing ma ke s ess pe iods, such as he
COVID-19 pandemic. The co ela ion in he sho - e m window luc ua es conside ably,
e lec ing ma ke ola ili y. Howe e , he longe window demons a es a consis en upwa d
end, especially since he pandemic, indica ing a weakening bu s ill e y signi ican nega i e
ela ionship be ween IIFX and V2TX du ing ola ile and unce ain ma ke condi ions. The IIFX
and V1XI analysis ollows a simila pa e n o he V2TX analysis, wi h a nega i e co ela ion.
The esul s show a mo e p onounced ela ionship be ween EU impac i ms and he STOXX
index. This indica es ha EU impac i ms mo e s ongly in andem wi h he o e all ma ke ,
sugges ing limi ed di e si ica ion bene i s wi hin hese asse s. Con e sely, he nega i e
co ela ions wi h V2TX and V1XI indices a e weake , implying ha EU impac i ms a e no as
s ongly a ec ed by hese indices. This migh sugges some po en ial di e si ica ion bene i s
agains implied ma ke ola ili y.
26
5. RESULTS AND DISCUSSION
To de e mine whe he impac in es men s can se e as a sa e-ha en, isk-hedging, and
di e si ica ion s a egy, and whe he hey exhibi esilience du ing c isis pe iods, we analysed
he inancial e u ns o 55 EU impac i ms om Janua y 2016 o Ma ch 2024. Using a DCC
Mul i a ia e GARCH model, we assessed he co ela ion o inancial e u ns be ween hese EU
impac i ms and Eu opean ma ke benchma k indices, speci ically STOXX: STOXX Eu ope 600
Index, V2TX: EURO STOXX 50 Vola ili y Index, and V1XI: DAX-New Vola ili y Index.
Ou da ase consis s o 1852 daily obse a ions om Janua y 5, 2016, o Ma ch 27, 2024, and
is di ided in o h ee sub-samples. The i s sub-sample co e s he p e-COVID-19 pe iod, om
Janua y 5, 2016, o Janua y 23, 2020. The second sub-sample, which includes he COVID-19
pe iod, spans om Janua y 24, 2020, ma king he beginning o COVID-19 in Eu ope, o May 5,
2023, ma king he end o COVID-19 as a global heal h eme gency by he Wo ld Heal h
O ganiza ion (WHO). The hi d sub-sample co e s he pandemic-wa pe iod, which includes
bo h he COVID-19 pe iod, s a ing om Janua y 24, 2020, and he ongoing wa ha began
wi h Russia’s in asion o Uk aine on Feb ua y 24, 2022, and con inues o he p esen . The e is
an o e lap du ing he COVID-19 and he pandemic-wa pe iod sub-samples, bo h ep esen ing
pe iods o unce ain y and c isis in ou analysis, while he p e-COVID-19 pe iod ep esen s a
mo e s able pe iod.
27
Table 4 - Es ima ion esul s o DCC-GARCH model
IIFX - STOXX V2TX V1XI
In e al A: Full sample pe iod (Janua y 5, 2016, o Ma ch 27, 2024)
mu
0,00091
***
0,00087
***
-
0,00234
***
-
0,00257
***
a 1
0,59805
**
0,69392
***
0,90520
***
0,90349
***
ma1
-
0,65505
**
-
0,74200
***
-
0,97919
***
-
0,97445
***
omega
0,00001
0,00000
0,00020
0,00021
alpha1
0,12154
***
0,14872
***
0,07253
0,09254
**
be a1
0,82997
***
0,83374
***
0,89916
***
0,87378
***
shape
6,20753
***
4,11845
***
3,87625
***
3,87668
***
dcca1
0,05724
***
0,04994
***
0,04629
***
dccb1
0,88929
***
0,85095
***
0,85290
***
mshape
5,25560
***
5,05504
***
5,07079
***
In e al B: P e-COVID-19 (Janua y 5, 2016, o Janua y 23, 2020)
mu 0,00072*** 0,00069*** -0,00202*** -0,00207***
a 1 -0,98386*** 0,89013*** 0,89743*** 0,88094***
ma1 0,99404*** -0,91941*** -0,98258*** -0,97340***
omega 0,00001*** 0,00000 0,00165** 0,00131**
alpha1 0,14919*** 0,15629** 0,13187** 0,13571***
be a1 0,73270*** 0,79554*** 0,58204*** 0,58696***
shape 6,23262*** 4,45051*** 4,13100*** 4,47376***
dcca1 0,02638** 0,03193* 0,02366
dccb1 0,89077*** 0,86290*** 0,77044***
mshape 5,99599*** 4,97099 5,27980***
In e al C: Du ing COVID-19 (Janua y 24, 2020, o May 5, 2023)
mu 0,00115*** 0,00116*** -0,00550*** -0,00597***
a 1 0,43800** 0,35614* 0,56564*** 0,58181***
ma1 -0,53108*** -0,45583** -0,70558*** -0,70600***
omega 0,00001** 0,00001 0,00010 0,00009
alpha1 0,10927*** 0,17879*** 0,05428*** 0,06326***
be a1 0,84601*** 0,82020*** 0,93334*** 0,92752***
shape 5,77550*** 3,77321*** 4,09054*** 3,64227***
dcca1 0,07553*** 0,05139*** 0,05852***
dccb1 0,87301*** 0,86181*** 0,85152***
mshape 4,79235*** 5,21968*** 4,70195***
In e al D: Pandemic-Wa pe iod (Janua y 24, 2020, o Ma ch 27, 2024)
mu 0,00119*** 0,00106*** -0,00235 -0,00304***
a 1 0,39749** 0,43635** 0,63472*** 0,91642***
ma1 -0,48883*** -0,51604*** -0,75888*** -0,97543***
omega 0,00001 0,00000 0,00004 0,00006
alpha1 0,10810 0,14620** 0,04981*** 0,06896***
be a1 0,85384*** 0,84787*** 0,94483*** 0,92499***
shape 6,35171*** 3,93751*** 4,36091*** 3,75488***
dcca1 0,07188*** 0,04203** 0,04609***
dccb1 0,88166*** 0,87768*** 0,87235***
mshape 5,05991*** 5,74517*** 5,09007***
28
Coe icien es ima es de i ed om uni a ia e GARCH and Dynamical Condi ional Co ela ions (DCC). Uni a ia e
GARCH p ocesses a e calcula ed o each index (wi h pa ame e s
mu, omega, alpha1, be a1), be o e es ima ing he DCC pa ame e s dcca1 and dccb1. The indices conside ed
include all h ee pai s o Impac In es ing Fi ms Index (IIFX) agains each o STOXX Eu ope 600 index (STOXX),
EURO STOXX 50 Vola ili y index (V2TX) and DAX-New Vola ili y index (V1XI). The use o he mul i a ia e -
dis ibu ion allowed he model o accoun o hea y ails and ex eme alues in he da a, which a e common in
inancial da a, leading o mo e obus and ealis ic modelling o inancial e u ns. ***, **, * indica e s a is ical
signi icance a he 1%, 5% and 10% le els, espec i ely.
SHORT-TERM VOLATILITY CONTAGION BETWEEN EUROPEAN IMPACT FIRMS AND EUROPEAN
MARKET’S VOLATILITY (V2TX/V1XI)
Sho - e m ola ili y con agion desc ibes he immedia e and signi ican esponse o ola ili y
in one ma ke —in his case, EU impac i ms— o changes in ola ili y in ano he ma ke ,
ep esen ed by Eu opean ma ke ola ili y indices V2TX and V1XI. The DCC-GARCH model
cap u es his phenomenon using he alpha 1 coe icien s (impac o pas shocks on cu en
ola ili y es ima e) and he dcca1 coe icien s (sho - e m dynamics in he co ela ion
be ween he Eu opean Impac In es ing Fi ms Index (IIFX) and he V2TX/V1XI indices).
Du ing he ull sample pe iod, he indings using he DCC-GARCH model, as shown in Table 4,
sugges a mode a e esponse o ecen shocks in bo h V2TX and V1XI, indica ing ha 7.253%
and 9.254% o he ecen shocks pe sis in he ola ili y dynamics o hese indices. The sho -
e m con agion wi h EU impac i ms, as measu ed by he dcca1 alues o 0.04994 o V2TX
and 0.04629 o V1XI, appea s o be sligh bu s a is ically signi ican . This means ha sudden
changes in Eu opean ma ke ola ili y led o a sligh sensi i i y in he ola ili y o EU impac
i ms. The ela i ely low dcca1 alues sugges ha while he e is some sho - e m con agion,
EU impac i ms a e no highly eac i e o ex eme mo emen s in Eu opean ma ke ola ili y,
indica ing po en ial di e si ica ion bene i s.
In he p e-COVID-19 pe iod, he alpha1 coe icien s o 0,13187 o V2TX and 0,13571 o V1XI
e eal a highe deg ee o sho - e m ola ili y pe sis ence. This means ha in s able imes,
pas shocks ha e a s onge in luence on cu en ola ili y es ima es. The dcca1 alues o
0,03193 o V2TX and 0,02366 o V1XI sugges weake sho - e m co ela ions wi h EU impac
i ms. This indica es ha EU impac i ms we e no highly sensi i e o changes in Eu opean
ma ke ola ili y. This weake sensi i i y sugges s po en ial o di e si ica ion du ing s able
pe iods. Howe e , he s a is ical signi icance o hese alues is no s ong o all measu es,
implying ha he obse ed ela ionship migh be due o andom chance a he han a obus
co ela ion.
Du ing he COVID-19 pe iod, he e is a educed esponse o ecen shocks, e ealed by he
alpha1 coe icien s o 0,05428 o V2TX and 0,06326 o V1XI, indica ing ha immedia e pas
shocks had a lesse impac on cu en ola ili y. This could e lec he unique ma ke
condi ions du ing he pandemic, whe e ola ili y was d i en mo e by ongoing unce ain y han
by ecen shocks. Addi ionally, he dcca1 alues o 0,05139 o V2TX and 0,05852 o V1XI
29
sugges sligh ly highe sho - e m con agion compa ed o he p e-COVID-19 pe iod. This
indica es ha EU impac i ms became somewha mo e esponsi e o ecen changes in
Eu opean ma ke ola ili y du ing he pandemic. The inc eased con agion e lec s a mo e
in e connec ed and esponsi e ma ke en i onmen , ye he ela i ely low alues s ill indica e
po en ial di e si ica ion bene i s as EU impac i ms we e no excessi ely sensi i e o ma ke
ola ili y.
In he pandemic-wa pe iod, which encompasses bo h he COVID-19 pandemic and he
ongoing wa , he alpha1 alues 0,04981 o V2TX and 0,06896 o V1XI sugges a mino impac
o immedia e pas shocks on cu en ola ili y. This con inued mino in luence e lec s he
p olonged pe iod o unce ain y whe e ola ili y was in luenced mo e by ongoing c ises a he
han ecen shocks. The dcca1 alues o 0,04203 o V2TX and 0,04609 o V1XI indica e ha
he sho - e m sensi i i y o EU impac i ms o ma ke ola ili y emained sligh bu
s a is ically signi ican . Despi e he ex ended c isis pe iod, impac i ms exhibi ed ela i ely
s able beha iou in he ace o Eu opean ma ke ola ili y, indica ing hei esilience. The
sligh ly highe dcca1 alues compa ed o p e-COVID-19 sugges a main ained, ye s ill
mode a e, sensi i i y o ma ke ola ili y.
O e all, Eu opean impac i ms show a ying deg ees o sensi i i y o ma ke ola ili y ac oss
di e en pe iods. Du ing s able, p e-COVID-19 pe iods, hei ola ili y was less co ela ed wi h
b oade ma ke ola ili y, p o iding po en ial di e si ica ion bene i s. Howe e , du ing imes
o c isis, such as he COVID-19 pandemic and he ongoing geopoli ical con lic , hei sho -
e m sensi i i y inc eased, e lec ing a mo e in e connec ed ma ke en i onmen . Despi e he
inc eased sho - e m sensi i i y du ing c ises, he ela i ely low dcca1 alues indica e ha
Eu opean impac i ms s ill o e some di e si ica ion bene i s.
This analysis suppo s he s a egic inclusion o Eu opean impac i ms in in es men po olios
o mi iga e isk and enhance s abili y in he sho - e m, especially du ing s able pe iods.
Howe e , i also highligh s he necessi y o ongoing esea ch o con i m hei di e si ica ion
and isk-hedging bene i s du ing di e en ma ke condi ions.
LONG-TERM VOLATILITY CONTAGION BETWEEN EUROPEAN IMPACT FIRMS AND EUROPEAN
MARKET’S VOLATILITY (V2TX/V1XI)
Long- e m ola ili y con agion desc ibes he endu ing and sus ained esponse o ola ili y in
EU impac i ms o changes in he Eu opean ma ke ola ili y indices. This can be assessed
h ough he be a1 and dccb1 coe icien s. Be a1 cap u es he pe sis ence o shocks o e ime,
while dccb1 ep esen s he long- e m dynamics in he co ela ion be ween Eu opean impac
i ms and ma ke ola ili y indices (V2TX/V1XI).
Du ing he ull sample pe iod, he be a1 coe icien s o 0,89916 o V2TX and 0,87378 o V1XI
sugges a high pe sis ence o ola ili y in hese indices o e ime. This indica es ha ola ili y
shocks ha e a long-las ing impac , e lec ing sus ained ma ke unce ain y and in es o

30
sen imen . Co espondingly, he dccb1 alues o 0,85095 o V2TX and 0,85290 o V1XI imply
a s ong long- e m con agion be ween EU impac i ms and he b oade ma ke ola ili y
indices. This sugges s ha he long- e m ola ili y dynamics o EU impac i ms a e signi ican ly
in luenced by he b oade Eu opean ma ke ola ili y. This high pe sis ence and s ong long-
e m con agion imply ha in he long un, EU impac i ms a e mo e likely o ollow he ends
o expec ed ma ke ola ili y.
In he p e-COVID-19 pe iod, he be a1 alues o 0,58204 o V2TX and 0,58696 o V1XI a e
signi ican ly lowe han in he ull sample pe iod. This indica es ha du ing s able imes, he
long- e m pe sis ence o ola ili y in hese indices was educed, e lec ing a mo e s able
ma ke en i onmen . The dccb1 alue o 0,86290 o V2TX and 0.77044 o V1XI sugges a
s ong long- e m co ela ion wi h EU impac i ms, al hough sligh ly weake han in he ull
sample pe iod. This indica es ha e en du ing s able pe iods, EU impac i ms we e in luenced
by he ma ke 's long- e m ola ili y, bu o a lesse ex en han du ing c isis pe iods. The high
dccb1 alues imply ha while EU impac i ms migh p o ide some di e si ica ion in he sho -
e m, hei long- e m ola ili y was e y closely aligned wi h ma ke ola ili y ends.
Du ing he COVID-19 pe iod, he be a1 coe icien s inc eased signi ican ly o 0,93334 o V2TX
and 0,92752 o V1XI, e lec ing e y high long- e m pe sis ence o ola ili y. This e lec s he
sus ained unce ain y and heigh ened isk en i onmen du ing he pandemic. The dccb1
alues o 0,86181 o V2TX and 0,85152 o V1XI e eal a s ong long- e m con agion wi h EU
impac i ms, simila o he ull sample pe iod. This high long- e m co ela ion indica es ha
du ing he pandemic, EU impac i ms' ola ili y was closely ied o he Eu opean ma ke 's
long- e m ola ili y, educing hei di e si ica ion bene i s in imes o p olonged c isis.
In he pandemic-wa pe iod, he be a1 alues emained high a 0.94483 o V2TX and 0.92499
o V1XI, indica ing a pe sis ence o ecen shocks simila o ha obse ed du ing COVID-19.
Co espondingly, he dccb1 alues o 0.87768 o V2TX and 0.87235 o V1XI indica e a e y
s ong long- e m co ela ion dynamic, compa able o he COVID-19 pe iod. This high long-
e m co ela ion du ing he p olonged pe iod o unce ain y unde sco es he con inued
in luence o ma ke ola ili y on EU impac i ms. The long- e m alignmen o hei ola ili y
wi h ma ke ends sugges s limi ed di e si ica ion bene i s du ing ex ended pe iods o c isis.
O e all, EU impac i ms exhibi s ong long- e m ola ili y con agion wi h Eu opean ma ke
ola ili y indices ac oss all pe iods. Du ing s able, p e-COVID-19 pe iods, hei long- e m
ola ili y pe sis ence was lowe bu s ill signi ican . Du ing imes o c isis, such as he COVID-
19 pandemic and he ongoing geopoli ical con lic , hei long- e m ola ili y closely ollowed
he ma ke ola ili y ends, educing hei e ec i eness as a di e si ica ion ool.
In summa y, he esul s o he DCC-GARCH model indica e ha while EU impac i ms o e
some di e si ica ion bene i s in he sho - e m, hei s ong long- e m con agion wi h ma ke
ola ili y sugges s limi ed isk-hedging bene i s du ing ex ended pe iods o c isis. Thei
ola ili y emains closely aligned wi h ma ke ola ili y sen imen /expec ancy, highligh ing he
31
need o a di e si ied po olio s a egy ha includes o he asse s o e ec i ely manage long-
e m isk.
SHORT-TERM VOLATILITY CONTAGION BETWEEN EUROPEAN IMPACT FIRMS AND EUROPEAN
MARKET’S BENCHMARK (STOXX)
Du ing he ull sample pe iod, he indings sugges a high esponse o ecen shocks, wi h an
alpha1 alue o 0,14872, indica ing ha app oxima ely 14.872% o ecen shocks pe sis in he
ola ili y dynamics o he STOXX Index. This pe sis ence is highe han ha obse ed o V2TX
and V1XI, indica ing a s onge endency o STOXX ola ili y o ca y o e pas shocks. The
sho - e m con agion wi h EU impac i ms, as measu ed by he dcca1 alue o 0.05724,
appea s o be sligh bu s a is ically signi ican . This implies a modes sensi i i y o EU impac
i ms o sudden changes in he b oade Eu opean ma ke , highligh ing hei po en ial o
p o iding di e si ica ion bene i s. Al hough con agion was compa able o V2TX and V1XI, he
highe dcca1 alue alida ed he s onge ela ionship be ween EU impac i ms and STOXX.
In he p e-COVID-19 pe iod, he alpha1 coe icien o 0.15629 e eals a sligh ly highe deg ee
o sho - e m ola ili y pe sis ence compa ed o he ull sample pe iod. The dcca1 alue o
0.02638 indica es a s a is ically signi ican bu modes sho - e m co ela ion be ween EU
impac i ms and STOXX. This alue, simila o he con agion le els wi h V2TX and V1XI,
sugges s ha EU impac i ms we e no highly sensi i e o changes in he b oade Eu opean
ma ke du ing his ime. The e o e, EU impac i ms o e ed no able di e si ica ion bene i s,
mo ing independen ly om he b oade ma ke .
Du ing he COVID-19 pe iod, he esponse o ecen shocks inc eased, as e idenced by he
alpha1 coe icien o 0.17879. This high pe sis ence o ola ili y is g ea e han he alpha1
alues o V2TX and V1XI, indica ing ha STOXX expe ienced mo e endu ing ola ili y du ing
he pandemic. The dcca1 alue o 0.07553 sugges s ha EU impac i ms we e mo e
esponsi e o changes in he b oade Eu opean ma ke compa ed o V2TX and V1XI. This
inc eased sho - e m con agion implies ha he di e si ica ion bene i s o impac in es men s
we e lowe du ing he pandemic. Howe e , hei ela i e s abili y s ill p o ided some le el o
esilience, unde sco ing he in e connec ed na u e o ma ke s du ing c ises.
In he pandemic-wa pe iod, he alpha1 alue o 0.14620 indica es a sligh ly educed
pe sis ence o ola ili y shocks compa ed o he p e-COVID-19 pe iod. Fu he mo e, he dcca1
alue o 0.07188 e eals ha al hough EU impac i ms exhibi ed highe sho - e m sensi i i y
o changes in STOXX ola ili y compa ed o V2TX and V1XI, hei ola ili y emained ela i ely
s able. This s abili y du ing a p olonged pe iod o unce ain y sugges s ha EU impac i ms
main ained po en ial di e si ica ion bene i s, exhibi ing esilience despi e he heigh ened
in e connec edness wi h he b oade ma ke .
In summa y, while EU impac i ms p o ide some di e si ica ion bene i s du ing s able pe iods,
hei inc eased sho - e m sensi i i y o STOXX ola ili y du ing c ises sugges s limi ed isk-
32
hedging bene i s in he sho - e m. In es o s seeking o use EU impac i ms o di e si ica ion
should conside he heigh ened co ela ion wi h b oade Eu opean ma ke du ing imes o
c isis.
LONG-TERM VOLATILITY CONTAGION BETWEEN EUROPEAN IMPACT FIRMS AND EUROPEAN
MARKET’S BENCHMARK (STOXX)
Du ing he ull sample pe iod, he be a1 coe icien o STOXX is 0.83374, lowe han he
es ima es o V2TX and V1XI. This indica es ha while he pe sis ence o ma ke shocks in
STOXX is subs an ial, i is somewha less p onounced han in he o he wo indices.
Addi ionally, he dccb1 alue o 0.88929 sugges s a s ong long- e m co ela ion be ween EU
impac i ms and STOXX, implying signi ican in luence by long- e m ola ili y ends in he
b oade Eu opean ma ke and a high le el o in e connec edness.
In he p e-COVID-19 pe iod, he be a1 alue is 0.79554, indica ing sligh ly lowe long- e m
ola ili y pe sis ence compa ed o he ull sample pe iod, al hough highe han he es ima es
o V2TX and V1XI. This sugges s ha he pe sis ence o ma ke shocks was mo e endu ing in
STOXX compa ed o he o he indices. The dccb1 alue o 0.89077 e eals a s ong long- e m
co ela ion wi h EU impac i ms, simila o he ull sample pe iod. This indica es ha e en
du ing s able pe iods, EU impac i ms we e s ill signi ican ly in luenced by he long- e m
ola ili y ends in he b oade Eu opean ma ke .
Du ing he COVID-19 pe iod, he be a1 coe icien inc eased o 0.82020, which is lowe han
he alues o V2TX and V1XI, bu i s ill e lec s a high le el o pe sis ence in ola ili y
es ima es o e he long e m. The dccb1 alue o 0.87301 indica es a s ong long- e m
co ela ion wi h EU impac i ms, hough sligh ly lowe han he p e-COVID-19 pe iod. This
sugges s ha while EU impac i ms we e in luenced by long- e m ends in STOXX ola ili y
du ing he pandemic, hei co ela ion was sligh ly educed and he e ec s less p onounced.
In he ull pandemic-wa pe iod, he be a1 coe icien is 0.84787, indica ing e y high long-
e m ola ili y pe sis ence. The dccb1 alue o 0.88166, compa able o V2TX and V1XI, e eals
a e y s ong long- e m co ela ion dynamic. This sugges s ha du ing pe iods o p olonged
unce ain y, EU impac i ms emain highly in e connec ed wi h he b oade ma ke , educing
hei po en ial o p o iding di e si ica ion bene i s.
O e all, he analysis o long- e m ola ili y con agion be ween EU impac i ms and STOXX
e eals a pa e n simila o ha obse ed wi h V2TX and V1XI. The be a1 and dccb1
coe icien s indica e ha EU impac i ms a e hea ily in luenced by long- e m ola ili y ends
in he b oade ma ke . This educes hei po en ial o p o iding di e si ica ion bene i s o e
he long e m, as hei pe o mance is closely ied o he b oade ma ke 's long- e m ends.
33
Table 5 - Es ima ion esul s o Copula-DCC-GARCH model
STOXX V2TX V1XI
In e al A: Full sample pe iod (Janua y 5, 2016, o Ma ch 27, 2024)
dcca1 0,05768*** 0,04982*** 0,04799***
dccb1 0,88277*** 0,84471*** 0,84092***
mshape 5,20945*** 7,66998*** 7,07260***
In e al B: P e-COVID-19 (Janua y 5, 2016, o Janua y 23, 2020)
dcca1 0,02796** 0,03164* 0,02405
dccb1 0,88473*** 0,85604*** 0,77232***
mshape 6,37226*** 5,37302*** 5,48550***
In e al C: Du ing COVID-19 (Janua y 24, 2020, o May 5, 2023)
dcca1 0,08002*** 0,05316*** 0,05911***
dccb1 0,86273*** 0,85805*** 0,85198***
mshape 5,52369*** 12,25248** 8,92788***
In e al D: Pandemic-Wa pe iod (Janua y 24, 2020, o Ma ch 27, 2024)
dcca1 0,07006*** 0,04550*** 0,04919***
dccb1 0,88069*** 0,86967*** 0,86887***
mshape 5,22330*** 13,64738** 10,43416**
The esul s o he Copula-DCC-GARCH and DCC-GARCH models indica e ha while bo h
models yield simila dynamic condi ional co ela ions (DCC) be ween he asse e u ns, he
Copula-DCC-GARCH model demons a es a be e o e all i . This is e iden om be e alues
in me ics such as In o ma ion C i e ia (AIC, BIC, Shiba a, and HQC), Log-likelihood, Mean
Squa ed E o (MSE), and Roo Mean Squa ed E o (RMSE).
The es ima ed pa ame e s (dcca1 and dccb1) o bo h models show close co espondence
ac oss di e en pe iods, indica ing simila co ela ion dynamics. Howe e , he shape
pa ame e s (mshape) and o he i indices consis en ly a ou he Copula-DCC-GARCH model,
sugges ing i cap u es he da a cha ac e is ics mo e accu a ely.
The imp o emen in model i o he Copula-DCC-GARCH model is pa icula ly no iceable
when examining he s a is ical signi icance and he magni udes o he es ima ed coe icien s.
Fo ins ance, du ing he COVID-19 and Pandemic-Wa pe iods, he mshape alues a e
ma kedly highe in he Copula-DCC-GARCH model, indica ing a be e accommoda ion o he
da a's hea y- ailed na u e and ex eme e en s. Consequen ly, i indica es ha he Copula-
DCC-GARCH model p o ides mo e p ecise and eliable o ecas s o ola ili y and co ela ions
compa ed o he adi ional DCC-GARCH model (see Appendix E).
40
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44
APPENDIX A
Table A1 Lis and summa y cha ac e is ics o impac i ms
Company
name
Impac
In es ing a eas
Business ac i i y (b ie desc ip ion)
Abb L d Na u al Capi al
P o ides sus ainable and esou ce-e icien elec i ica ion, mo ion and
obo ics, and au oma ion echnologies and solu ions o op imizing,
elec i ying, and deca bonizing ope a ions, in o de o enhance ene gy
e iciency, and a ain a low-ca bon socie y and ne -ze o u u e. I
p o ides digi ally connec ed and enabled indus ial equipmen and
sys ems o cus ome s in u ili ies, indus y, anspo , and in as uc u e
sec o s.
ACS
Ac i idades de
Cons uccion y
Se icios SA
Na u al Capi al
Is a e e ence in he cons uc ion business: de eloping highways,
ailways, ma i ime and ai po s p ojec s, also esiden ial buildings, social
in as uc u e, and acili ies p ojec s; anspo concessions indus y:
de eloping “g een ield” in as uc u es; and in as uc u es and
en i onmen al se ices: such as s ee cleaning, was e collec ion and
anspo a ion, was e ecycling, and o he s.
Als om SA Na u al Capi al
O e s p o en al e na i es o diesel on non-elec i ied ne wo ks by being
he i s playe wi h hyd ogen-powe ed lee s in comme cial se ice, and
by de eloping and p omo ing inno a i e and sus ainable (hyd ogen and
ba e y-elec ic) mobili y and in as uc u e solu ions ha help educe
ene gy consump ion.
Anheuse -
Busch Inbe SA
Na u al Capi al
P oduces, dis ibu es, and ma ke s bee , alcoholic be e ages, and so
d inks made om simple ing edien s, g own locally, and b ewed wi h he
aim o p ese e na u al esou ces. They pa ne wi h local a me s and
in es in esea ch and de elopmen o sus ainable b ewing me hods.
Also, ha e a business- o-business e-comme ce pla o m o empowe
small and medium-sized e ail pa ne s and help g ow hei businesses.
A hens Wa e
Supply and
Sewe age
Company SA
Basic Needs
Responsible o managing he wa e supply and sewe age sys ems in he
egion o A ica, G eece, p o iding clean and sa e d inking wa e o
esiden s, businesses, and o he cus ome s wi hin i s se ice a ea, and
collec ing and ea ing was ewa e o p o ec public heal h and he
en i onmen .
BAE Sys ems
PLC Empowe men
Is a de ense, ae ospace, and secu i y company ha de elops, enginee s,
manu ac u es, and suppo s p oduc s and sys ems o deli e mili a y
capabili y, p o ec na ional secu i y and people, and keep c i ical
in o ma ion and in as uc u e secu e. I also d i es he de elopmen o
sus ainable elec ic solu ions in he de ence and comme cial sec o .
Ba a
De elopmen s
P L C
Na u al Capi al
Is a comme cial p ope y de elope and esiden ial cons uc ion
con ac o whose p ima y business in ol es he cons uc ion, sale, and
de elopmen o esiden ial p ope ies, inco po a ing ene gy-e icien
ea u es, sus ainable building ma e ials, and en i onmen ally iendly
p ac ices in o i s p ojec s o minimize en i onmen al impac and mee
sus ainabili y goals.
Beie sdo AG Basic Needs
De elops and ma ke s pe sonal ca e p oduc s and sel -adhesi e p oduc
solu ions, such as ace ca e, body ca e, sun p o ec ion, and wound ca e,
conside ing he deca bonisa ion o hei ope a ions and anspo by
emb acing enewable ene gy. I commi s o sou cing aw ma e ials om
a ious o igins, including palm oil, shea bu e and pape -based
ma e ials, and p omo es was ewa e ecycling ac oss hei p oduc ion.
Ma ke s i s p oduc s unde NIVEA, Euce in, and o he b ands.
Boi on SA Basic Needs Engages in he p o ision o homeopa hic medicines p o iding sa e and
quali y medicines and d ugs ha a e used as al e na i e o
45
complemen a y ea men s o a ious heal h condi ions. Commi s o
sou cing aw ma e ials om a ious o igins, including plan s,
mine als/chemicals, and animals (e.g. enom). Gi es p e e ence o sho
channels and all cul i a ed plan s a e GM- ee.
BT G oup PLC Empowe men
Is a elecommunica ions and ne wo k p o ide which p o ides ixed and
mobile elecommunica ions and ela ed secu e digi al p oduc s,
solu ions and se ices powe ed by enewable elec ici y in hei jou ney
o ne ze o emissions and a ci cula wo ld. Has empowe ed people and
has accele a ed digi al ans o ma ion h ough hei esponsible,
inclusi e, and sus ainable echnology.
Cen ica PLC Clima e Change
Ope a es as an in eg a ed ene gy company ha ca ies ou elec ici y
gene a ion h ough combined cycle gas u bine (CCGT) powe s a ions,
and nuclea powe plan s, and i deli e s in eg a ed ene gy solu ions,
helping o ganiza ions balance he demands o p o i abili y and
sus ainabili y by p o iding ailo ed ze o ca bon and enewable ene gy
supply op ions.
Coloplas A/S Basic Needs
De elops, manu ac u es, and ma ke s medical de ices and se ices ha
make li e easie o people wi h e y pe sonal and p i a e medical
condi ions, like os omy ca e, u ology, con inence, and wound ca e. I
uses aw ma e ials such as enewables and p omo es p oduc and
packaging ecyclabili y.
Co icei a
Amo im SGPS
SA
Na u al Capi al
Leading specialis in co k p ocessing, ha ing a po olio o co k p oduc s
like co k loo ing, insula ion, and o he co k-based solu ions wi h high
added alue. Focuses on sus ainable co k p oduc ion and inno a i e
applica ions by o e ing eco- iendly solu ions ac oss a ious sec o s such
as a chi ec u e and design, cons uc ion and in as uc u e, mobili y,
ene gy, ae ospace, and o he s.
Danone SA Basic Needs
Is a manu ac u e and p oduce o essen ial dai y and plan -based
p oduc s, ea ly li e nu i ion, medical nu i ion and wa e s ha p io i ize
people's heal h and well-being. I dis ibu es i s p oduc s h ough e ail
chains, adi ional ma ke ou le s and specialized dis ibu ion channels,
including hospi als, clinics, and pha macies.
Dassaul
Sys emes SE Empowe men
Ope a es as a so wa e company, which p o ides a 3Dexpe ience
pla o m o c ea e inno a i e new p oduc s and se ices using i ual
expe iences, and in his way model he social and en i onmen al impac s
o e e y inno a ion and e alua e how i imp o es he li es o o he
people and hei communi ies.
Deu sche
Telekom AG Empowe men
Is a leading global elecommunica ions company ha p o ides mobile
ixed-line, in e ne , and IT se ices o consume s and businesses and
o e s sma p oduc s and se ices om enewable ene gy sou ces ha
help educe ene gy consump ion and conse e esou ces. Also,
empowe s p ojec s and ini ia i es wi h a posi i e con ibu ion o social
and en i onmen al challenges in he digi al wo ld.
EDP
Reno a eis SA Clima e Change
Is a enewable ene gy company ha concen a es on he p oduc ion o
ene gy om enewable esou ces, and i s ac i i ies comp ise he
de elopmen , ope a ion, and main enance o such elec ic powe
s a ions as hyd oelec ic, wind, sola , idal, biomass and was e plan s,
among o he s, educing ca bon emissions.
EnBW Ene gie
Baden
Wue embe g
AG
Clima e Change
T ansmi s, dis ibu es, and ades elec ic ene gy and na u al gas, and
p o ides ene gy- ela ed se ices. I gene a es elec ici y om
con en ional uels such as nuclea powe , as well as enewable sou ces
such as wind, sola , and hyd oelec ic o educe i s ca bon oo p in and
inc ease i s sha e o clean ene gy p oduc ion.
Endesa SA Clima e Change
Gene a es, dis ibu es, ansmi s, and sells ele ici y h ough he
pa icipa ion in hyd o, he mal, nuclea , combined cycle, and enewable
and cogene a ion plan s. Ope a es also in he na u al gas sec o and

46
p o ides o he alue-added se ices o wind a ms, mini hyd aulic,
biomass, and was e ea men plan s.
Enel SpA Clima e Change
Gene a es, anspo s, and dis ibu es elec ici y and sells elec ic ene gy
and na u al gas, g een ce i ica es, and CO2 emission igh s, wi h a
s ong emphasis on enewable ene gy sou ces like wind, sola ,
geo he mal and hyd opowe , p o iding he solu ions o powe elec ic
ehicles and sma ci ies as i pa icipa es in enewables ma ke s.
Fage hul
G oup AB Clima e Change
Designs, manu ac u es, and sells a wide ange o ligh ing ix u es and
sys ems ha ca e s o di e en ligh ing equi emen s and ene gy
e iciency goals, minimizing ene gy consump ion and en i onmen al
impac , o a ious p o essional applica ions, including o ices, schools,
hospi als, e ail spaces, and indus ial acili ies, p o iding he e o e
sus ainable solu ions o u ban a eas.
Fo um Oyj Clima e Change
P o ides elec ici y, gas, hea ing, and cooling se ices. The gene a ion o
elec ici y comp ises nuclea , hyd o, wind, and he mal powe
gene a ion, as well as powe po olio op imisa ion, ading, indus ial
in elligence, and global nuclea se ices. I 's esponsible o sus ainable
solu ions o u ban a eas.
F esenius SE &
Co KGaA Basic Needs
De elops and manu ac u es a wide a ie y o heal h ca e p oduc s,
which includes dialysis and non-dialysis p oduc s. P o ides dialysis ca e
and ela ed se ices o pe sons su e ing om end-s age enal disease
(ESRD), as well as o he heal hca e se ices o hospi als and medical
ca e o pa ien s a home.
Gebe i AG Na u al Capi al
P o ides sani a y p oduc s and sys ems including auce s and lushing
sys ems, and was e i ings and aps, ce amics and pipes and i ings o
he esiden ial, comme cial, new cons uc ion and eno a ion ma ke s
conside ing ecological and social aspec s. Con ibu es o sus ainable
cons uc ion o buildings by p o iding wa e e iciency solu ions and
sa ing ma e ials.
Ge esheime
AG Na u al Capi al
De elops and manu ac u es special y and inno a i e p oduc s o d ug
deli e y, such as insulin pens, inhale s, and p e illable sy inges, and i
p oduces d ug packaging o glass o medicines and cosme ics, such as
pha maceu icals ja s, ampoules, and o he s o he pha maceu ical,
bio ech, and heal hca e indus ies.
G i ols SA Basic Needs
De elops, manu ac u es, and dis ibu es a b oad ange o biological
medicines based on plasma de i ed p o eins ha enable pa ien s wi h
a e and ch onic diseases o lead heal hie li es. I helps ensu e he
sa e y o he wo ld’s blood supply, p o ides biological ma e ials,
including plasma, o li e-science esea ch and u he manu ac u ing,
and has a comp ehensi e po olio o ools, in o ma ion and se ices
ha enable hospi als o e icien ly deli e medical ca e.
Ind a Sis emas
SA Empowe men
P o ides consul ing and echnology solu ions such as sys ems in eg a ion
and ou sou cing se ices, ins alls ailway managemen and icke ing
sys ems, ins alls oad a ic oll and signalling sys ems, cons uc s
sa elli e communica ions sys ems, manu ac u es ada ai de ence
sys ems, and ins alls insu ance managemen sys ems o ae ospace,
de ence & secu i y, and mobili y sec o s.
Kingspan
G oup PLC Na u al Capi al
Is a global leade in high-pe o mance insula ion and building en elope
solu ions enabling low-ene gy and low-ca bon buildings. I also
specializes in he manu ac u e and dis ibu ion o sus ainable building
ma e ials, including insula ion boa ds, insula ed panels, enewable
ene gy sys ems, and wa e managemen solu ions.
Leg and SA Na u al Capi al
Is an elec ical and digi al building in as uc u e company o esiden ial,
comme cial, and indus ial buildings ha o e s a wide ange o p oduc s
and solu ions o elec ical ins alla ions, da a ne wo ks, building
47
au oma ion, and con ol sys ems ha a e simple, inno a i e, and
sus ainable.
Na u gy Ene gy
G oup SA Clima e Change
Is an in eg a ed gas and elec ic u ili y company ha ca ies ou he
explo a ion, de elopmen , lique ac ion, egasi ica ion, anspo a ion,
s o age, dis ibu ion, and comme cializa ion o na u al gas. Also, he
gene a ion, dis ibu ion, and comme cializa ion o elec ici y h ough
combined cycle, he mal, nuclea , hyd o, co-gene a ion and wind a m
plan s, and o he special egime echnologies.
NOS SGPS SA Empowe men
Engages in he elecommunica ions, media and en e ainmen
businesses o e ing s a e-o - he-a solu ions o ixed and mobile
elephony, ele ision, In e ne , oice, and da a o all ma ke sec o s.
Ope a es in he a ea o pay ele ision, nex -gene a ion b oadband
se ices, and ilm dis ibu ion, and has been in es ing in ene gy-e icien
echnologies, ansi ioning o enewable ene gy sou ces, and
implemen ing ini ia i es o educe was e gene a ion and p omo e
ecycling.
No a is AG Basic Needs
De elops, manu ac u es, and ma ke s pha maceu ical and consume
heal hca e p oduc s such as b anded and gene ic p esc ip ion d ugs,
ac i e pha maceu ical ing edien s (APIs), biosimila s and oph halmic
p oduc s. I uses inno a i e science and digi al echnologies o de elop
ans o ma i e ea men s and pa en -p o ec ed p esc ip ion medicines
in a eas o g ea medical need.
No o No disk
A/S Basic Needs
De elops, p oduces, and ma ke s pha maceu ical p oduc s ocused on
diabe es ca e and o e s insulin deli e y sys ems and o he diabe es
p oduc s. I also wo ks in he he apy a eas o haemophilia ca e, g ow h
ho mone he apy and ho mone eplacemen he apy.
No ozymes
A/S Na u al Capi al
Is a bio echnology company engaged in he p oduc ion and sale o
indus ial enzymes, mic oo ganisms, and biopha maceu ical ing edien s
o use in ag icul u e, bioene gy, ood & be e ages, household ca e,
lea he , pha maceu icals, o es p oduc s, ex ile, and was ewa e
ea men .
Pea son PLC Empowe men
Ope a es in he educa ion, assessmen , and ce i ica ions ma ke s, and
p o ides digi al con en , lea ning expe iences, assessmen s,
quali ica ions, and da a in he lea ning ma ke . I publishes ac oss he
cu iculum and p o ides a ange o educa ion se ices, including eache
de elopmen , educa ional so wa e, and sys em-wide solu ions. Also
owns and ope a es schools and colleges.
P oximus NV Empowe men
Engaged in he elecommunica ion, in o ma ion, communica ion, and
echnology (ICT) indus ies. I ans o ms a ange o echnologies, such as
In e ne o Things (IoT), Big Da a, Cloud and Secu i y, in o new digi al
ecosys ems and inno a i e solu ions, and p o ides eliable and secu e
communica ions shaping a ai , us wo hy, and inclusi e digi al wo ld
and accele a ing he ansi ion o a g een socie y.
Rockwool A/S Na u al Capi al
Is a manu ac u e and supplie o s one wool-based insula ion p oduc s
such as loo insula ion, ceiling insula ion, in e nal wall insula ion
ex e nal wall insula ion, HVAC insula ion, passi e i e p o ec ion,
acous ic insula ion, and o he mine al wool p oduc s, o use in
applica ions, including ic ion and wa e managemen while lowe ing
emissions, imp o ing in as uc u e, o enabling mode n ho icul u e
using ewe esou ces.
Schneide
Elec ic SE Clima e Change
P o ides ene gy- ela ed solu ions ha combine ene gy managemen ,
au oma ion, and so wa e. Some o i s p oduc s include au oma ion and
con ol p oduc s, low ol age p oduc s and sys ems, sola and ene gy
s o age, medium ol age dis ibu ion and g id au oma ion, and c i ical
powe , cooling, and acks. I also o e s ene gy and sus ainabili y
se ices, ield and au oma ion, cloud, consul ing, and aining se ices.
48
Se e n T en
PLC Basic Needs
P o ides clean wa e and was ewa e se ices, and i 's also in ol ed in
a eas ela ed o clima e change, p o ec ing wa e supplies, imp o emen
o biodi e si y, and de eloping enewable ene gy solu ions, gene a ing
enewable powe , h ough wind u bines, sola panels, and anae obic
diges ion o specially g own c ops.
SGL Ca bon SE Na u al Capi al
Is a manu ac u e o p oduc s and solu ions based on ca bon ib es and
special y g aphi e se ing se e al indus ies, such as s eel, aluminium,
au omo i e, ae ospace, chemical, wind ene gy, and en i onmen al
p o ec ion among o he s. I con ibu es o he de elopmen s o
sus ainable mobili y, new ene gies, and c oss-indus y digi aliza ion.
Siemens AG Na u al Capi al
Ope a es in he elec i ica ion, au oma ion, and digi aliza ion ields, as i
designs, de elops, and manu ac u es p oduc s, and ins alls complex
sys ems and p ojec s, ocusing on powe gene a ion and dis ibu ion,
and in elligen in as uc u e o buildings and dis ibu ed ene gy
sys ems. I also p o ides sma mobili y solu ions o ail and oad
anspo , medical echnology, and digi al heal hca e se ices.
SKF AB Na u al Capi al
Is a supplie o p oduc s, solu ions and se ices o bea ings, seals,
mecha onics, and lub ica ion sys ems ha o e s se ices such as
echnical suppo , condi ion moni o ing, main enance se ices, asse
e iciency op imiza ion, enginee ing consul ancy, including ma e ial
analysis and es ing, and aining. I p o ides clean echnology solu ions
o he indus ial ans o ma ion, and has been de eloping p oduc s o
become ligh e , mo e e icien , longe las ing, epai able, and,
ul ima ely, ecyclable.
Smi h &
Nephew PLC Basic Needs
Engages in he de elopmen , manu ac u e, ma ke ing, and sale o
medical de ices and se ices ocused on he epai , egene a ion, and
eplacemen o so and ha d issue, and o use in o hopaedic
econs uc ion and auma, spo s medicine, ENT, and ad anced wound
managemen . Some o i s p oduc s include knee and hip implan s o
eplace diseased, damaged, o wo n join s; obo ics-assis ed
echnologies; and auma- ela ed p oduc s o s abilize ac u es and
de o mi y co ec ion p ocedu es.
Smi hs G oup
PLC Na u al Capi al
I p o ides c i ical solu ions o he ene gy and p ocess, medical de ices
and consumables, de ices o he de ec ion and iden i ica ion o secu i y
h ea s and con aband, solu ions o high-speed connec i i y, and
componen s o hea and mo e luids and gases.
SSAB AB Na u al Capi al
Is engaged in he de elopmen , manu ac u e and ma ke ing o high
s eng h ossil- ee s eel p oduc s and solu ions in o de o c ea e an
o e ing comp ised o solu ions anging om ligh ness and du abili y o
s eng h, e iciency, sus ainabili y, and sa e y, o cus ome s in he hea y
anspo , cons uc ion and in as uc u e, indus ial applica ions,
cons uc ion machine y, ene gy, and ma e ial handling ma ke s.
S o a Enso Oyj Na u al Capi al
Is a p o ide o enewable solu ions in packaging, bioma e ials, wooden
cons uc ion, and pape indus ies ha de elops and p oduces solu ions
based on wood and biomass o a ange o indus ies and applica ions
such as building, e ail, ood and be e ages, manu ac u ing, publishing,
pha maceu ical, and o he s.
Swisscom AG Empowe men
Is a p o ide o elecommunica ion p oduc s and se ices such as mobile,
ixed and In e ne p o ocol (IP) based oice and da a communica ions,
and is cha ac e ized by i s sus ainabili y p ac ices by becoming clima e
neu al and p omo ing ci cula economy. I o e s digi al access se ices,
mobile ne wo k, and b oadband se ices o e exis ing subsc ibe lines.
Tele onica SA Empowe men
Ope a es as a elecommunica ions company ha o e s ixed and mobile
elephone, b oadband, and subsc ip ion ele ision se ices, as well as
p o ides cybe secu i y, IOT, big da a, and cloud solu ions. P omo es
49
deca bonisa ion and ci cula i y, economic and social p og ess h ough
digi aliza ion.
Tom a Sys ems
ASA Na u al Capi al
P o ides echnology-led solu ions ha enable he ci cula economy wi h
ad anced collec ion and so ing sys ems ha op imize esou ce eco e y
and minimize was e in he ood, ecycling, and mining indus ies.
Ucb SA Basic Needs
Is a biopha maceu ical company ha is engaged in he disco e y and
de elopmen o no el medicines and solu ions o he ea men o
a ious se e e diseases s i ing o de elop p oduc s o he ea men o
neu ology and immunology ela ed condi ions.
Umico e SA Na u al Capi al
De elops echnologies and p oduces ma e ials o sola cells used in
sa elli es, echa geable ba e ies, LED applica ions, ca alys s, e c. I
ecycles and ex ac s p ecious me als om lap ops and mobile phones,
among o he hings. I also educes ha m ul emissions, powe he
ehicles and echnologies o he u u e, and gi es new li e o used
me als.
Veolia
En i onnemen
SA
Clima e Change
I designs and p o ides wa e , was e, and ene gy managemen solu ions:
Wa e solu ions co e po able wa e plan s and supply sys ems,
was ewa e sys ems and ea men plan s, among o he s; Was e
solu ions include was e collec ion se ices on behal o local au ho i ies,
managemen o specialis so ing cen es and pla o ms, among o he s;
Ene gy solu ions o e powe gene a ion and ela ed se ices, such as
consul ing and plan design.
Ve bund AG Clima e Change
P o ides in eg a ed elec ic gene a ions, ansmission, and dis ibu ion
se ices. T ades powe and ene gy de i a i es o e he coun e and a
he majo powe exchanges ac oss Eu ope. I gene a es elec ici y ia i s
la ge ne wo k o hyd oelec ic powe plan s, which accoun s o
app oxima ely 90% o he powe gene a ed, supplemen ed by wind,
sola and he mal powe plan s, powe ed by ossil uels.
Ves as Wind
Sys ems A/S Clima e Change
Is a enewable ene gy company, ac i e wi hin he wind powe indus y,
ha designs, manu ac u es, ins alls, and p o ides se ices o onsho e
and o sho e powe con e e s, wind u bines, blades, and owe s. I
o e s se ices including da a-d i en consul ancy, lee op imiza ion,
blade main enance and inspec ion, powe gene a o epai s, and
gea box exchange.
Vossloh AG Na u al Capi al
Is a p o ide o ail in as uc u e se ices and anspo echnology o
ail in as uc u e and echnology ma ke s ha i o e s a unique p oduc
ange o ail in as uc u e, such as ail as ening sys ems, conc e e
sleepe s, swi ch sys ems and c ossings as well as se ices ela ed o he
alue main enance o he ails, he eby being an impo an con ibu o
o he mobili y o people and he anspo o commodi ies.
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Table E2 - In o ma ion C i e ia, Log-likelihood, MSE and RMSE o mul i a ia e GARCH models wi h m -dis ibu ion o IIFX-V2TX se ies
Model In e al AIC BIC Shiba a HQC Log-Lik MSE RMSE
DCC-GARCH
Full Pe iod -9,729 -9,675 -9,729 -9,709 9027,033 0,003 0,055
P e-COVID-19 -10,043 -9,944 -10,044 -10,005 4376,766 0,003 0,054
Du ing COVID-19 -9,199 -9,091 -9,200 -9,158 3559,759 0,004 0,059
Pandemic-Wa Pe iod -9,462 -9,372 -9,462 -9,428 4673,116 0,003 0,055
ADCC-GARCH
Full Pe iod -9,728 -9,671 -9,728 -9,707 9027,033 0,003 0,055
P e-COVID-19 -10,041 -9,937 -10,042 -10,001 4376,766 0,003 0,054
Du ing COVID-19 -9,197 -9,082 -9,198 -9,153 3559,824 0,004 0,059
Pandemic-Wa Pe iod -9,460 -9,365 -9,461 -9,424 4673,187 0,003 0,055
Copula-DCC-GARCH
Full Pe iod -9,750 -9,699 -9,750 -9,731 9045,444 0,003 0,055
P e-COVID-19 -10,057 -9,964 -10,058 -10,021 4381,797 0,003 0,054
Du ing COVID-19 -9,222 -9,119 -9,223 -9,183 3567,452 0,004 0,059
Pandemic-Wa Pe iod -9,482 -9,398 -9,483 -9,450 4682,141 0,003 0,055

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Table E3 - In o ma ion C i e ia, Log-likelihood, MSE and RMSE o mul i a ia e GARCH models wi h m -dis ibu ion o IIFX-V1IX se ies
Model In e al AIC BIC Shiba a HQC Log-Lik MSE RMSE
DCC-GARCH
Full Pe iod -9,927 -9,873 -9,927 -9,907 9210,045 0,002 0,050
P e-COVID-19 -10,248 -10,149 -10,248 -10,210 4465,457 0,002 0,049
Du ing COVID-19 -9,408 -9,299 -9,409 -9,366 3639,993 0,003 0,054
Pandemic-Wa Pe iod -9,655 -9,566 -9,656 -9,621 4768,384 0,003 0,051
ADCC-GARCH
Full Pe iod -9,926 -9,869 -9,926 -9,905 9210,045 0,002 0,050
P e-COVID-19 -10,245 -10,141 -10,246 -10,205 4465,457 0,002 0,049
Du ing COVID-19 -9,405 -9,291 -9,407 -9,361 3640,049 0,003 0,054
Pandemic-Wa Pe iod -9,654 -9,559 -9,655 -9,618 4768,636 0,003 0,051
Copula-DCC-GARCH
Full Pe iod -9,947 -9,896 -9,947 -9,928 9227,438 0,002 0,050
P e-COVID-19 -10,256 -10,162 -10,257 -10,220 4468,012 0,002 0,049
Du ing COVID-19 -9,438 -9,336 -9,439 -9,399 3650,761 0,003 0,054
Pandemic-Wa Pe iod -9,687 -9,603 -9,688 -9,655 4783,094 0,003 0,051
58
This is o ce i y ha
P ojec No.: FIN2024-6-149921
P ojec Ti le: Unde s anding he ela ionship be ween impac in es men i ms and ma ke
ola ili y
P incipal Resea che : Fábio Sousa
acco ding o he egula ions o he E hics Commi ee o NOVA IMS and MagIC Resea ch Cen e
his p ojec was conside ed o mee he equi emen s o he NOVA IMS In e nal Re iew Boa d,
being conside ed APPROVED on 6/14/2024.
I is he P incipal Resea che ’s esponsibili y o ensu e ha all esea che s and s akeholde s
associa ed wi h his p ojec a e awa e o he condi ions o app o al and which documen s
ha e been app o ed.
The P incipal Resea che is equi ed o no i y he E hics Commi ee, ia amendmen o
p og ess epo , o
- Any signi ican change o he p ojec and he eason o ha change;
- Any un o eseen e en s o unexpec ed de elopmen s ha me i no i ica ion;
- The inabili y o he P incipal Resea che o con inue in ha ole o any o he change in
esea ch pe sonnel in ol ed in he p ojec .
Lisbon, 6/14/2024
NOVA IMS E hics Commi ee
e hi[email p o ec ed]
59