Price connectedness between green bond and financial markets |
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| Institution: | 1. School of Economics and Finance, Massey University, Auckland, New Zealand;2. UCD College of Business, University College Dublin, Ireland;3. School of Economics and Finance, Massey University, Auckland, New Zealand;4. School of Accountancy Economics and Finance, University of Wollongong, Australia;5. School of Government, University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam;6. Tokai University, Kanagawa, Japan;1. Jönköping International Business School, Sweden;2. DIW Berlin, Germany;3. Ratio institute, Sweden;1. Economics Department, University of Central Oklahoma, 100 N University Dr, Edmond, 73034, USA;2. School of Public Finance, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu, District 3, Ho Chi Minh City, 700000, Viet Nam |
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| Abstract: | We study price connectedness between the green bond and financial markets using a structural vector autoregressive (VAR) model that captures direct and indirect transmission of financial shocks across markets. Using heteroskedasticity to identify the structural VAR model parameters, our empirical findings reveal that the green bond market is closely linked to the fixed-income and currency markets, receiving sizeable price spillovers from those markets and transmitting negligible reverse effects. We also show that, in contrast, the green bond market is weakly tied to the stock, energy and high-yield corporate bond markets. These findings have implications in terms of portfolio and risk management decisions for environmentally aware investors holding positions in green bonds. |
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| Keywords: | Green bonds Financial markets Price spillovers Structural VAR |
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