Extreme risk dependence between green bonds and financial markets

Sitara Karim, Brian M. Lucey, Muhammad A. Naeem, Larisa Yarovaya

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)935-960
Number of pages26
JournalEuropean Financial Management
Volume30
Issue number2
DOIs
Publication statusPublished - Mar 2024
Externally publishedYes

Keywords

  • CoVaR
  • COVID-19
  • financial markets
  • green bonds
  • TVOC

ASJC Scopus subject areas

  • Accounting
  • General Economics,Econometrics and Finance

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