Do the green bonds overreact to the COVID-19 pandemic?

Tianxiang Cui; Muhammad Tahir Suleman; Hongwei Zhang

doi:10.1016/j.frl.2022.103095

Do the green bonds overreact to the COVID-19 pandemic?

Financ Res Lett. 2022 Oct:49:103095. doi: 10.1016/j.frl.2022.103095. Epub 2022 Jun 26.

Authors

Tianxiang Cui¹, Muhammad Tahir Suleman², Hongwei Zhang^{1

3}

Affiliations

¹ School of Mathematics and Statistics, Central South University, Changsha 410083, China.
² Department of Accounting and Finance, University of Otago, New Zealand.
³ Institute of Metal Resources Strategy, Central South University, Changsha 410083, China.

Abstract

This paper explores the impacts of the COVID-19 pandemic on the global green bond and conventional assets, including commodity, treasury, stock and clean energy markets, using Diebold and Yilmaz (2012) and Baruník and Křehlík, 2018b spillover framework. The results show that spillover transmitted from COVID-19 is relatively strong over a medium- and long-term horizon, and the spillover effects sharply increased when the pandemic became severe. Furthermore, green bonds are most affected by the COVID-19 pandemic, followed by the treasury, while the other conventional assets are only slightly affected. Additionally, our findings also contain a low-risk portfolio during COVID-19 pandemic.

Keywords: COVID-19 pandemic; Conventional financial markets; Green bond; Portfolio analysis; Time and frequency analysis.