This study intends to investigate the main drivers of socially responsible stock index returns. For this reason, Dow Jones Sustainability Index World (DJSIW) is employed to identify companies that incorporate socially responsible initiatives in their business operations. As far as explanatory drivers of DJSIW returns are concerned, four variables are considered namely, gold prices, dollar US value to major currencies, interest rate and air pollution, while oil prices is examined in relation to volatility of DJSIW returns. Furthermore, a GARCH method was applied to investigate the relationship between explanatory variables and DJSIW returns for the period August, 1999 to 31 May, 2016 using monthly data. It is revealed that all explanatory variables have a negative effect on DJSIW. In addition, the increase of oil prices has a stabilizing effect on volatility of DJSIW returns. The results are important to explain the investor’s behaviour to socially responsible stock index returns.
Keywords: Dow Jones Sustainability Index, Carbon Dioxide, Interest Rate, Crude Oil, Gold