Dynamic spillover effects among green bond, renewable energy stocks and carbon markets during COVID-19 pandemic: Implications for hedging and investments strategies

Tiwari, Aviral Kumar; Abakah, Emmanuel Joel Aikins; Gabauer, David; Dwumfour, Richard Adjei

doi:10.1016/j.gfj.2021.100692

Cited by 259 publications

(94 citation statements)

References 63 publications

(78 reference statements)

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“…The rapidly growing research on green bond and cryptocurrencies have shown mixed evidence regarding their relationship with other asset classes (Naeem et al, 2021a, b, c, d, e;Zhang et al, 2019). Furthermore, the literature concerning the linkages between oil prices and stock prices of clean energy and technology companies is inconclusive (Nasreen et al, 2020;Tiwari et al, 2022). Hence, this study attempts to contribute to the existing literature by examining the nexus and the connectedness between Green Bond Index, crude oil, gold, MSCI World Index and Emerging Markets Index (EMI) and the cryptocurrency, namely, Bitcoin, during the pre-and post-Covid period beginning from August 2011 to July 2021 (10 years).…”

Section: Financial Market Interdependencementioning

confidence: 99%

Revisiting the financial market interdependence during COVID-19 times: a study of green bonds, cryptocurrency, commodities and other financial markets

Rao

Gupta

Sharma

et al. 2022

IJMF

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PurposeThe purpose of the present study is to contribute to the existing literature by examining the nexus and the connectedness between classes S&P Green Bond Index, S&P GSCI Crude Oil Index, S&P GSCI Gold, MSCI Emerging Markets Index, MSCI World Index and Bitcoin, during the pre-and post-Covid period beginning from August 2011 to July 2021 (10 years).Design/methodology/approachThe study employs time-varying parameter vector autoregression and Quantile regression methods to understand the impact of events on traditional and upcoming asset classes. To further understand the connectedness of assets under consideration, the study used Geo-Political Risk Index (GPR) and Global Economic Policy and Uncertainty index (GPEU).FindingsFindings show that these markets are strongly linked, which will only expand in the post-pandemic future. Before the pandemic, the MSCI World and Emerging Markets indices contributed the most shocks to the remaining market variables. Green bond index shows a greater correlation and shock transmission with gold. Bitcoin can no longer be used as a good hedging instrument, validating the fact that the 21st-century technology assets. The results further opine that under extreme economic consequences with high GPR and GPEU, even gold cannot be considered a safe investment asset.Originality/valueFinancial markets and the players who administer and communicate their investment logics are heavily reliant on conventional asset classes such as oil, gas, coal, nuclear and allied groupings, but these emerging asset classes are attempting to diversify.

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Section: Financial Market Interdependencementioning

confidence: 99%

Revisiting the financial market interdependence during COVID-19 times: a study of green bonds, cryptocurrency, commodities and other financial markets

Rao

Gupta

Sharma

et al. 2022

IJMF

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“…Their study reports that the benefits from green bonds arise from an increase in the return and a decrease in the volatility for most of the cases. Additionally, the paper by Tiwari et al (2022) shows that green bonds help to significantly reduce the investment risk of other assets in bilateral portfolios. Their study examines the transmission of return patterns between green bonds, carbon prices, and renewable energy stocks with a dynamic connectedness approach to model the interconnectedness of a predetermined network and construct numerous bivariate and multivariate portfolios.…”

Section: Empirical Literaturementioning

confidence: 99%

Green Bonds for the Transition to a Low-Carbon Economy

2022

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The green bond market is emerging as an impactful financing mechanism in climate change mitigation efforts. The effectiveness of the financial market for this transition to a low-carbon economy depends on attracting investors and removing financial market roadblocks. This paper investigates the differential bond performance of green vs non-green bonds with (1) a dynamic portfolio model that integrates negative as well as positive externality effects and via (2) econometric analyses of aggregate green bond and corporate energy time-series indices; as well as a cross-sectional set of individual bonds issued between 1 January 2017, and 1 October 2020. The asset pricing model demonstrates that, in the long-run, the positive externalities of green bonds benefit the economy through positive social returns. We use a deterministic and a stochastic version of the dynamic portfolio approach to obtain model-driven results and evaluate those through our empirical evidence using harmonic estimations. The econometric analysis of this study focuses on volatility and the risk–return performance (Sharpe ratio) of green and non-green bonds, and extends recent econometric studies that focused on yield differentials of green and non-green bonds. A modified Sharpe ratio analysis, cross-sectional methods, harmonic estimations, bond pairing estimations, as well as regression tree methodology, indicate that green bonds tend to show lower volatility and deliver superior Sharpe ratios (while the evidence for green premia is mixed). As a result, green bond investment can protect investors and portfolios from oil price and business cycle fluctuations, and stabilize portfolio returns and volatility. Policymakers are encouraged to make use of the financial benefits of green instruments and increase the financial flows towards sustainable economic activities to accelerate a low-carbon transition.

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“…As such, Shah et al ( 2021 ) documented for Denmark that pandemic has a multiplier effect along with a harmful impact on renewable energy production. With reference to shocks propagation, Tiwari et al ( 2022 ) found that clean energy transmits the highest value of shocks to other markets. Li and Meng ( 2022 ) confirmed that renewable energy stocks are the primary contributors in the analyzed connectedness system.…”

Section: Background Literaturementioning

confidence: 99%

Modeling the impact of the COVID‐19 outbreak on environment, health sector and energy market

Armeanu

Gherghina

Vasile

et al. 2022

Sustainable Development

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The global outbreak of COVID‐19 disease had a significant impact on the entire globe. Such a notable public health event can be seen as a “black swan” that brings unpredictable and unusual forces into the economic context and that it could typically lead to a chain of adverse reactions and market disruptions. Hence, the purpose of this study is to examine how COVID‐19 affects the environment, health, and the oil and energy markets. To achieve this objective, we used daily data for several measures that refer to the environment, health, and oil and energy, for the first wave of the COVID‐19 pandemic (December 31, 2019–May 22, 2020). The variable integration mix led to the approach of the ARDL model, and the Granger causality test was also employed. These empirical techniques allowed us to examine the cointegration between variables and causal relationships. The econometric results of the ARDL models exhibited that the global new cases and new deaths of COVID‐19 have short and long‐term effects on the environment, the health sector, the oil, and energy measures. However, no significant causal connection was found between the pandemic and the environment, the health sector, or the oil and energy industry, according to the Granger causality test. The uniqueness of current approach consists in the investigation of pandemic impact on the health, environment, oil, and energy sector by applying the ARDL model that permits the analysis of cointegration both in the long run and in the short term. This study provides important insights for investors and policy makers.

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Dynamic spillover effects among green bond, renewable energy stocks and carbon markets during COVID-19 pandemic: Implications for hedging and investments strategies

Cited by 259 publications

References 63 publications

Revisiting the financial market interdependence during COVID-19 times: a study of green bonds, cryptocurrency, commodities and other financial markets

Revisiting the financial market interdependence during COVID-19 times: a study of green bonds, cryptocurrency, commodities and other financial markets

Green Bonds for the Transition to a Low-Carbon Economy

Modeling the impact of the COVID‐19 outbreak on environment, health sector and energy market

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