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

Frontiers in Environmental Science

Muhammad Abubakr Naeem¹  Syed Jawad Hussain Shahzad²  Majed Alharthi³  Imen Mbarki⁵  Abdelwahed Omri⁵ 

[1] Business Administration Department, Faculty of Management Sciences, ILMA University, Karach, Pakistan;Department of Accounting, Analysis and Audit, South Ural State University, Chelyabinsk, Russia Federation;Finance Department, College of Business, King Abdulaziz University, Rabigh, Saudi Arabia;Finance, Control and Law, Montpellier Business School, France;The Finance and Accounting Department, GEF2A-Lab, Higher Institute of Management of Tunis, University of Tunis, Tunis, Tunisia;UCD College of Business, University College Dublin, Albany, Ireland;

关键词: COVID19;    green bonds;    network connectedness;    time and frequency domain;    hedging effectiveness;   

DOI  :  10.3389/fenvs.2021.657533

来源: DOAJ

【 摘 要 】

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.

【 授权许可】

Unknown