An examination of green bonds as a hedge and safe haven for international equity markets

Ren, Boru; Lucey, Brian; Luo, Qirui

doi:10.1016/j.gfj.2023.100894

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An examination of green bonds as a hedge and safe haven for international equity markets

Boru Ren

, Brian Lucey, Qirui Luo

Global Finance Journal, Volume: 58, Start page: 100894

Swansea University Author: Boru Ren

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DOI (Published version): 10.1016/j.gfj.2023.100894

Abstract

Green bonds are a type of fixed-income instrument that specifically designed to fund environmentally friendly projects. Investigating the performance of green bonds is essential to gain insights into the risk-return characteristics and dynamics within sustainable finance and their potential role in...

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Published in:	Global Finance Journal
ISSN:	1044-0283 1873-5665
Published:	Elsevier BV 2023
Online Access:	Check full text
URI:	https://cronfa.swan.ac.uk/Record/cronfa64719
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first_indexed	2023-10-17T17:13:59Z
last_indexed	2023-10-17T17:13:59Z
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spelling	v2 64719 2023-10-11 An examination of green bonds as a hedge and safe haven for international equity markets 73321f2d7e2e1c7bd4be9bf6d47fd2a2 0000-0001-8647-9689 Boru Ren Boru Ren true false 2023-10-11 BAF Green bonds are a type of fixed-income instrument that specifically designed to fund environmentally friendly projects. Investigating the performance of green bonds is essential to gain insights into the risk-return characteristics and dynamics within sustainable finance and their potential role in portfolio diversification. In this paper, we comprehensively examine the ability of green bonds to act as a hedge or a safe haven against nineteen international equity market movements (most of the G20 and Switzerland) over the 2014–2022 period. Using regression analysis, we find that green bonds had acted as a strong hedge for many countries but have lost such property for utmost after the COVID-19 outbreak, while they still provide safe haven benefit for many countries' equity indexes. By the use of a novel CAViaR-based TVP-VAR connectedness approach, we further examine the tail risk spillovers among green bond and international equities which extends the consideration in extreme loss (VaR) perspective. We show that the spillovers rapidly increased during the first wave of COVID-19 and has remained at relatively high level until recent days. In combination of all metrics, we argue that Saudi Arabia might be the only country that has received as good (or even better) protection from green bond in the post-pandemic era as (than) before. Overall, these should increase the attractiveness of green bonds as elements of a portfolio, enhancing the green transition. Journal Article Global Finance Journal 58 100894 Elsevier BV 1044-0283 1873-5665 Green bond, Hedge, Safe haven, Spillovers, Connectedness, Stock markets, Uncertainty 30 11 2023 2023-11-30 10.1016/j.gfj.2023.100894 http://dx.doi.org/10.1016/j.gfj.2023.100894 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2023-11-27T15:30:53.6082500 2023-10-11T14:48:24.3432024 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Boru Ren 0000-0001-8647-9689 1 Brian Lucey 2 Qirui Luo 3 64719__29120__e27bb9891f1a477eaa0dd3d09627bf7c.pdf 64719.VOR.pdf 2023-11-27T15:22:10.9147512 Output 16829748 application/pdf Version of Record true © 2023 The Author(s). Published by Elsevier Inc. Distributed under the terms of a Creative Commons Attribution 4.0 International License (CC BY 4.0). true eng https://creativecommons.org/licenses/by/4.0/
title	An examination of green bonds as a hedge and safe haven for international equity markets
spellingShingle	An examination of green bonds as a hedge and safe haven for international equity markets Boru Ren
title_short	An examination of green bonds as a hedge and safe haven for international equity markets
title_full	An examination of green bonds as a hedge and safe haven for international equity markets
title_fullStr	An examination of green bonds as a hedge and safe haven for international equity markets
title_full_unstemmed	An examination of green bonds as a hedge and safe haven for international equity markets
title_sort	An examination of green bonds as a hedge and safe haven for international equity markets
author_id_str_mv	73321f2d7e2e1c7bd4be9bf6d47fd2a2
author_id_fullname_str_mv	73321f2d7e2e1c7bd4be9bf6d47fd2a2_***_Boru Ren
author	Boru Ren
author2	Boru Ren Brian Lucey Qirui Luo
format	Journal article
container_title	Global Finance Journal
container_volume	58
container_start_page	100894
publishDate	2023
institution	Swansea University
issn	1044-0283 1873-5665
doi_str_mv	10.1016/j.gfj.2023.100894
publisher	Elsevier BV
college_str	Faculty of Humanities and Social Sciences
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hierarchy_top_title	Faculty of Humanities and Social Sciences
hierarchy_parent_id	facultyofhumanitiesandsocialsciences
hierarchy_parent_title	Faculty of Humanities and Social Sciences
department_str	School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url	http://dx.doi.org/10.1016/j.gfj.2023.100894
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description	Green bonds are a type of fixed-income instrument that specifically designed to fund environmentally friendly projects. Investigating the performance of green bonds is essential to gain insights into the risk-return characteristics and dynamics within sustainable finance and their potential role in portfolio diversification. In this paper, we comprehensively examine the ability of green bonds to act as a hedge or a safe haven against nineteen international equity market movements (most of the G20 and Switzerland) over the 2014–2022 period. Using regression analysis, we find that green bonds had acted as a strong hedge for many countries but have lost such property for utmost after the COVID-19 outbreak, while they still provide safe haven benefit for many countries' equity indexes. By the use of a novel CAViaR-based TVP-VAR connectedness approach, we further examine the tail risk spillovers among green bond and international equities which extends the consideration in extreme loss (VaR) perspective. We show that the spillovers rapidly increased during the first wave of COVID-19 and has remained at relatively high level until recent days. In combination of all metrics, we argue that Saudi Arabia might be the only country that has received as good (or even better) protection from green bond in the post-pandemic era as (than) before. Overall, these should increase the attractiveness of green bonds as elements of a portfolio, enhancing the green transition.
published_date	2023-11-30T15:30:54Z
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An examination of green bonds as a hedge and safe haven for international equity markets

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