Since the start of the 21st century, dynamics of the economic and financial market has changed to a great extent. Today the sustainability has become an important topic of research among the academic researchers. This study explored the effect of the liquidity volatility and Extreme market events on the performance of the Swedish ESG rated stocks.

The data was taken for the years between 2014-2019. Using Tobin’s Q as the measure of market performance, liquidity volatility as the measure of stock level volatility, Liquidity skewness and liquidity black hole as indicator of the extreme market events. ESG risk scores were taken from SUSTAINALYTICS, and the sample was divided into HER and LER firms. Conducting the empirical analysis on the 40 Swedish firms that were rated by the Sustainalytics, this study compared findings from pooled OLS, Panel Fixed Effect, and Panel Random Effect model for analysis.

Study found that relationship between the liquidity volatility and the market performance is contributed by the ESG risk scores. Liquidity volatility was negatively associated with Tobin’s Q of HER firms and positively associated for the LER firms. The findings could not substantiate the relationship between the extreme market events and the performance. Further, this study beliefs that a lot of potential exist in this area which can be explored in the future.