Reference no: EM132138704

Graph an event study relationship.

The event in consideration here is:

"Environmental performance, being green, clean-tech, corporate sustainability, and many other "green" issues are on the forefront of the current economic discussion. To help better understand the consequences of firm environmental behavior it will be useful to examine the relationship between corporate environmental decisions and stock market reaction. Therefore, this paper analyzes the effects of the 2009 Newsweek Green Rankings on firms' financial performance, as measured by stock market returns.

An event study examines some variable or measure before and after an event occurs. Therefore, the effect of the event is captured by the change of the variable. Since it is known that the event occurs before the reaction a strong case for causality is present. This paper uses stock prices and abnormal returns of companies to measure the stock market reaction to the Newsweek Rankings. The stock prices are the changing variables that helps explain more about the Newsweek Rankings and how investors react to their release.

This study finds evidence that the stock market react negatively to the Newsweek Rankings as a whole. This could mean that the stock market does not like hearing about environmental news. The data also suggests that investors react negatively to news that a company is more environmentally friendly than previously thought. This potentially means that investors place a negative value on environmentally conscious corporations."