Extreme risk dependence between green bonds and financial markets

Karim, Sitara, Lucey, Brian M., Naeem, Muhammad A. and Yarovaya, Larisa (2023) Extreme risk dependence between green bonds and financial markets. European Financial Management. (doi:10.1111/eufm.12458).

Record type: Article

Abstract

The current study investigates the extreme risk dependence between green bonds and financial markets by employing the dual approaches of time-varying optimal copula and extreme risk spillover analysis of dynamic conditional Value-at-Risk. We report significant symmetric (asymmetric) tail-dependent copulas in the upper (lower) tails characterizing independent regimes. Green bonds offer sufficient diversification, safe-haven, and hedging opportunities during stable and distressing times to financial markets. The extreme risk spillovers revealed that COVID-19 transformed the spillovers between green bonds and financial markets except Bitcoin. We proposed insightful implications for policymakers, governments, investors, and portfolio managers to relish the findings for their investment avenues.

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Euro Fin Management - 2023 - Karim - Extreme risk dependence between green bonds and financial markets - Version of Record

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