Relationship between green bonds and financial and environmental variables: A novel time-varying causality

Hammoudeh, Shawkat; Ajmi, Ahdi Noomen; Mokni, Khaled

doi:10.1016/j.eneco.2020.104941

Cited by 193 publications

(81 citation statements)

References 20 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Furthermore, they show that green bonds are weakly interconnected with high-yield corporate bond, stock and energy markets regardless of the time scales. Hammoudeh et al (2020) study the relationship between green bonds and three assets covering the US 10-year Treasury bond index, clean energy stock index, and CO2 Emission Allowance prices. Their results show mixed evidence of unidirectional Granger causality running from each of the three assets to green bonds over various time periods, suggesting the inability of green bonds to predict the price changes of the three asset indices under study.…”

Section: Literature Reviewmentioning

confidence: 99%

Climate bond, stock, gold, and oil markets: Dynamic correlations and hedging analyses during the COVID-19 outbreak

Dutta

Bouri

Noor³

2021

Resources Policy

View full text Add to dashboard Cite

Adverse ecological effects have recently generated several eco-friendly investment opportunities including green and climate bonds. Although climate bonds have emerged as an appealing investment, little is known about their dynamic correlations and market linkages with US equities, crude oil, and gold markets, especially during stress times such as the COVID-19 outbreak, which are essential for asset allocation and hedging effectiveness. In this paper, we report time-varying correlations between climate bonds and each of the markets considered, which intensify during the COVID-19 pandemic. On average, climate bonds are negatively associated with US equities and have a near zero correlation with crude oil, whereas they are positively associated with gold. There is a bidirectional volatility linkage between climate bonds and the three indexes under study, whereas return linkages are marginal. The hedge ratio is positive for bond-gold, whereas it switches between positive and negative states for bond-stock and bond-oil, especially it switches more extremely during the COVID-19 outbreak. Although climate bonds provide the highest risk reduction in a portfolio containing US equities or gold as a part of a hedging strategy, their hedging effectiveness is considerably reduced during the pandemic. The findings have implications for markets participants aiming to green their portfolios and make them robust during stress times, enabling a smooth and speedy transition to a low-carbon economy.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Climate bond, stock, gold, and oil markets: Dynamic correlations and hedging analyses during the COVID-19 outbreak

Dutta

Bouri

Noor³

2021

Resources Policy

View full text Add to dashboard Cite

show abstract

“…There are limited studies in the literature review that tested the correlation between green bonds and other financial markets (Hammoudeh et al, 2020;Nguyen et al, 2020;Reboredo and Ugolini, 2020). Hammoudeh et al (2020) examined the link between green bonds, financial assets, and the environment. The financial assets are United States conventional bonds and WilderHill clean energy (equity) index, while CO 2 emissions represent the environment from July 30 2014 to February 10 2020.…”

Section: Literature Reviewmentioning

confidence: 99%

Did COVID-19 Impact the Connectedness Between Green Bonds and Other Financial Markets? Evidence From Time-Frequency Domain With Portfolio Implications

Naeem

Mbarki

Alharthi

et al. 2021

Front. Environ. Sci.

View full text Add to dashboard Cite

COVID-19 has morphed from a health crisis to an economic crisis that affected the global economy through several channels. This paper aims to study the impact of COVID-19 on the time-frequency connectedness between Green Bonds and other financial assets. Our sample includes the global stock market, bond market, oil, USD index, and two popular hedging alternatives, namely Gold and Bitcoin, from May 2013 to August 2020. First, we apply the methodologies of Diebold and Yilmaz (International Journal of Forecasting, 2012, 28(1), 57–66) and Baruník and Křehlík (Journal of Financial Econometrics, 2018, 16(2), 271–296). Then, we estimate hedge ratios and hedge effectiveness of green bonds for other financial assets. Green bonds are found to have a great weight in the overall network, particularly strongly connected with the USD index and bond index. While the bi-directional relationship with USD persists during COVID, the connectedness with conventional bonds is also strengthened. Notably, we find a weak relationship between Green bonds and Bitcoin, both in the short and long run. As portfolio implications, Gold and USD have the highest hedge ratio, which is confirmed by the hedging effectiveness. In contrast, oil and stocks exhibit the lowest hedging effectiveness. Our findings imply that financial assets might have a heterogeneous relationship with green bonds. Furthermore, despite its infancy, it seems that the role of green bond during a crisis should not be ignored, as it can be a hedger for some assets, while a contagion amplifier during crisis times.

show abstract

“…Specifically, he indicates that GB markets have diversification benefits for investors in stock and energy markets. Significant causality running from the US 10-year Treasury bond index to GBs and causality running from the clean energy index to GBs have been demonstrated by Hammoudeh et al (2020). Similarly, Liu et al (2021) find positive dynamic average and tail dependence between GBs and clean energy stock markets, contributing to policymakers and environmentally friendly investors with GB positions by adding unexpected tail losses.…”

Section: Literature Reviewmentioning

confidence: 91%

“…These results are in accordance with other studies, such as that of Nguyen et al (2020), and Le et al (2020), who provide evidence of a significant relationship between GBs and other asset classes. In addition, Hammoudeh et al (2020) indicated a significant relationship between the US 10-year bond and GB markets, starting from 2016 to 2019. Specifically, they also confirmed that a significant time-varying connectedness between the GBs and the clean energy index is very limited to 2019.…”

Section: Copula For Tail Dependencementioning

confidence: 98%

“…Sample periods are selected based on the availability of data per corresponding markets. The starting date of the sample period is dictated by the data availability on the S&P GB Index (Hammoudeh et al, 2020;Huynh, 2020;Reboredo, 2018). The primary source of data used in this article is taken from Datastream and expressed in terms of the US dollar.…”

Section: Datamentioning

confidence: 99%

See 1 more Smart Citation

Green Bonds and Asset Classes: New Evidence from Time-varying Copula and Transfer Entropy Models

Hung

2021

Global Business Review

View full text Add to dashboard Cite

The green bond market has gradually developed worldwide since its debut in 2007 and is viewed as a new form of investment. This study explores the time-varying interdependence between green bond and conventional asset classes, namely Bitcoin price, Standard and Poor’s (S&P) 500, Clean Energy Index, Goldman Sachs Commodity Index (GSCI) Commodity Index and 10-year US bond spanning from May 2013 to December 2019, using both time-varying copula and transfer entropy models. We first focus on static and dynamic correlations between the green bond and other assets, and then identify the causal association among them. The findings suggest that green bonds and other assets have conditional time-varying dependence, and dependence is relatively low. Using transfer entropy, further evidence is gained for causal associations between two variables, which is depicted by two categories like mono-direction and bi-direction. Such nexus reveals the transmitter and receiver of return innovations on these markets. These findings make a considerable contribution to policymakers and environmentally friendly investors with green bond positions.

show abstract

Relationship between green bonds and financial and environmental variables: A novel time-varying causality

Cited by 193 publications

References 20 publications

Climate bond, stock, gold, and oil markets: Dynamic correlations and hedging analyses during the COVID-19 outbreak

Climate bond, stock, gold, and oil markets: Dynamic correlations and hedging analyses during the COVID-19 outbreak

Did COVID-19 Impact the Connectedness Between Green Bonds and Other Financial Markets? Evidence From Time-Frequency Domain With Portfolio Implications

Green Bonds and Asset Classes: New Evidence from Time-varying Copula and Transfer Entropy Models

Contact Info

Product

Resources

About