TY - JOUR
T1 - Tail risk dependence, co-movement and predictability between green bond and green stocks
AU - Tiwari, Aviral Kumar
AU - Abakah, Emmanuel Joel Aikins
AU - Yaya, Ola Oluwa Simon
AU - Appiah, Kingsley Opoku
N1 - Publisher Copyright:
© 2022 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2023
Y1 - 2023
N2 - This paper examines the coherence of extreme returns between green bonds and a unique set of green stocks. We use the novel quantile cross-spectral coherence methodology of quantile spectral coherency model, cross-quantilogram correlation approach, windowed time-lagged cross-correlation, and windowed scalogram difference models as estimation techniques. The study period spans from 28 November 2008 to 23 September 2020. Our measure of green stocks comprises the constituents of the MSCI Global Environment Price Index: Alternative Energy, Green Building, Pollution Prevention or Clean Technology while our green bond market is proxied by S&P Green Bond Index. We find the dependency between Green Bonds and green stocks to be weak, and this is high during market downturn periods in the short- to medium-term dynamics. This suggests that Green Bonds do act as a hedge, diversifier, or safe-haven instrument for environment portfolio in the short-term, medium-term and long-term dynamics during bearish market conditions. We conclude that green bonds and green stocks are two distinct asset classes with a distinct risk-return profile despite their common climate-friendly nature.
AB - This paper examines the coherence of extreme returns between green bonds and a unique set of green stocks. We use the novel quantile cross-spectral coherence methodology of quantile spectral coherency model, cross-quantilogram correlation approach, windowed time-lagged cross-correlation, and windowed scalogram difference models as estimation techniques. The study period spans from 28 November 2008 to 23 September 2020. Our measure of green stocks comprises the constituents of the MSCI Global Environment Price Index: Alternative Energy, Green Building, Pollution Prevention or Clean Technology while our green bond market is proxied by S&P Green Bond Index. We find the dependency between Green Bonds and green stocks to be weak, and this is high during market downturn periods in the short- to medium-term dynamics. This suggests that Green Bonds do act as a hedge, diversifier, or safe-haven instrument for environment portfolio in the short-term, medium-term and long-term dynamics during bearish market conditions. We conclude that green bonds and green stocks are two distinct asset classes with a distinct risk-return profile despite their common climate-friendly nature.
KW - Green bond
KW - cross-Quantilogram correlation
KW - environmental securities
KW - wavelets scalogram
UR - http://www.scopus.com/inward/record.url?scp=85134173079&partnerID=8YFLogxK
U2 - 10.1080/00036846.2022.2085869
DO - 10.1080/00036846.2022.2085869
M3 - Article
AN - SCOPUS:85134173079
SN - 0003-6846
VL - 55
SP - 201
EP - 222
JO - Applied Economics
JF - Applied Economics
IS - 2
ER -