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Frequency connectedness and cross-quantile dependence between green bond and green equity markets

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  • Pham, Linh

Abstract

This paper aims at investigating the frequency connectedness and cross-quantile dependence between green bond and green equity markets. By decomposing green bond and green equity time series data into different frequency bands, we first identify how the connectedness between green bond and green equity varies between the short-term, medium-term and long-term investment horizons. Next, we employ a cross-quantilogram framework to investigate the cross-quantile dependence between green bond and green equity and to capture the spillovers between these markets across a wide range of market conditions. Our empirical results suggest that after controlling for movements in the general stock, energy and fixed-income markets, the dependence between green bond and green equity during normal market conditions is relatively small. On the other hand, green bond and green equity are more connected during extreme market movements, where they boom and bust together. We also find that across all market conditions, the spillover effects between green bond and green equity are short-lived, as the degree of connectedness dissipates in the medium- and long-term investment horizons. Our results have important implications for environmentally conscious investors and policymakers.

Suggested Citation

  • Pham, Linh, 2021. "Frequency connectedness and cross-quantile dependence between green bond and green equity markets," Energy Economics, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001626
    DOI: 10.1016/j.eneco.2021.105257
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    More about this item

    Keywords

    Green equity; Green bond; Frequency connectedness; Cross-quantile dependence;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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