viiContents1 Prologue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 GreensThe Obvious Choice Over the Grays? . . . . . . . . . . . . . . . . . . . 5 2.1 The Green Indexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 Greens and Grays in the Indian Market . . . . . . . . . . . . . . . . . . . . . . . 9 2.2.1 Construction of Green and Gray Portfolios in Indian Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.3 Green and the Gray: A Comparative Approach in Terms of Risk and Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.3.1 Comparison of Own-Risk-Adjusted Return for Portfolios: A Stochastic Dominance Approach . . . . . . . . 19 2.3.2 Comparison of Market Risk of Portfolios: Transmission from Market Return and Market Volatility to Individual Portfolios . . . . . . . . . . . . . . . . . . . . . . 24 2.4 Are the Green Portfolios Inherently Unstable? A Look into Possible Nonlinearity of Portfolio Returns . . . . . . . . . . . . . . . . . . . . 31 2.4.1 Test for Nonlinearity: BDS Test . . . . . . . . . . . . . . . . . . . . . . . 32 2.4.2 The State Space Reconstruction . . . . . . . . . . . . . . . . . . . . . . . 33 2.4.3 Mutual Information Criterion: Finding . . . . . . . . . . . . . . . . 34 2.4.4 False Nearest Neighborhood: Decide the Optimal m . . . . . . . 34 2.4.5 Determinism Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.4.6 Maximum Lyapunov Exponent . . . . . . . . . . . . . . . . . . . . . . . 36 2.5 How Shockproof the Green Portfolios Are: A Survival Analysis . . . 37 2.5.1 Potential of the Green Portfolios to Survive Financial Crisis: A Scenario Analysis . . . . . . . . . . . . . . . . . . 38 2.5.2 Potential of the Green Portfolios to Survive Financial Crisis: A Survival Analysis Using Stress Index . . . 48 2.6 Factors Affecting Financial Stress: Greens Versus Grays . . . . . . . . . 51 2.7 Are the Greens Obvious Choice Over the Grays? Some Remarks . . . 58 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Contentsviii3 Profits Are Forever: A Green Momentum Strategy Perspective . . . . . . 63 3.1 Beating the MarketEnd of a Myth? . . . . . . . . . . . . . . . . . . . . . . . . 63 3.2 Technical Trading Rules: A Review of the Alternative Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.2.1 Filter Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.2.2 Moving Average Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.2.3 Momentum Strategy Based on a Simple Regression Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 3.2.4 Cross-sectional Momentum Strategy (XSMOM) . . . . . . . . . . 66 3.2.5 Time Series Momentum Strategy (TSMOM) . . . . . . . . . . . . . 67 3.3 Optimal Trading Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 3.3.1 Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 3.3.2 Finding the Optimum Trading Rule . . . . . . . . . . . . . . . . . . . . 70 3.4 Does Green Really Rule the Others? A Birds Eye Perspective . . . . . 81 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891Abstract Global warming has been the biggest threat humankind has faced in the twentieth century. After the industrial revolution, the amount of greenhouse gas in the atmosphere has increased rapidly, leading to a rise in the atmospheric tem- perature. If greener production technologies are not adapted, by the end of the cen- tury, the global climate may change dramatically, causing worldwide catastrophe. Studies have shown that greener companies outperform the other companies even in terms of financial return. Therefore, from the above discussion, it is evident that investment in green and energy-efficient firms is the most profitable choice for wise investors in time to come.Keywords Global warming Climate change Green investment Sustainable production“Global warming, along with the cutting and burning of forests and other critical hab- itats, is causing the loss of living species at a level comparable to the extinction event that wiped out the dinosaurs 65 million years ago. That event was believed to have bee