TY - JOUR
T1 - Factors behind the performance of green bond markets
AU - Adekoya, Oluwasegun B.
AU - Abakah, Emmanuel J.A.
AU - Oliyide, Johnson A.
AU - Luis A, Gil Alana
N1 - Publisher Copyright:
© 2023 The Authors
PY - 2023/11
Y1 - 2023/11
N2 - The market for green bonds has grown dramatically over the past several years, necessitating an understanding of the variables that might forecast its performance. Studies on how the green bond market interacts with other markets are widely discussed in the literature, but little is known about the variables that improve predictions of green bond returns. In this study, we use data on commodity and financial asset prices, as well as speculative factors, to predict the returns on green bonds using the Feasible Quasi-Generalized Least Squares (FQGLS) and the causality-in-quantiles estimators. The findings demonstrate that most factors are significant predictors of the returns on green bonds, with speculative factors having a detrimental predictive influence, and commodity and financial asset prices having a mixed predictive impact. When asymmetries are taken into account, the asymmetric predictive model performs better at predicting the returns on green bonds than its symmetric counterpart in most instances. Finally, all the factors, except investors' sentiment, affect the returns on green bonds in a variety of market situations. The interdependence among the global financial and commodity markets, as well as economic uncertainties justify the established predictive influence, since green bonds are a component of the broader investment bonds.
AB - The market for green bonds has grown dramatically over the past several years, necessitating an understanding of the variables that might forecast its performance. Studies on how the green bond market interacts with other markets are widely discussed in the literature, but little is known about the variables that improve predictions of green bond returns. In this study, we use data on commodity and financial asset prices, as well as speculative factors, to predict the returns on green bonds using the Feasible Quasi-Generalized Least Squares (FQGLS) and the causality-in-quantiles estimators. The findings demonstrate that most factors are significant predictors of the returns on green bonds, with speculative factors having a detrimental predictive influence, and commodity and financial asset prices having a mixed predictive impact. When asymmetries are taken into account, the asymmetric predictive model performs better at predicting the returns on green bonds than its symmetric counterpart in most instances. Finally, all the factors, except investors' sentiment, affect the returns on green bonds in a variety of market situations. The interdependence among the global financial and commodity markets, as well as economic uncertainties justify the established predictive influence, since green bonds are a component of the broader investment bonds.
KW - Commodities
KW - Financials
KW - Green bond
KW - Predictability
KW - Uncertainties
UR - http://www.scopus.com/inward/record.url?scp=85163035652&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2023.06.015
DO - 10.1016/j.iref.2023.06.015
M3 - Article
AN - SCOPUS:85163035652
SN - 1059-0560
VL - 88
SP - 92
EP - 106
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -