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Spillovers and connectedness between green bond and stock markets in bearish and bullish market scenarios

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  • Mensi, Walid
  • Shafiullah, Muhammad
  • Vo, Xuan Vinh
  • Kang, Sang Hoon

Abstract

This study examines the quantile connectedness between eight green bonds and the S&P 500 index using the methodology of Ando et al. (2022). We show that green bonds and the S&P 500 index exhibit stronger connectedness during crises (GFC, COVID-19, etc.). Furthermore, green bonds are relatively less volatile during extraordinary events. The distribution tails dictate connectedness (short-term) in the wake of extreme events. The quantile spillover in the green financial markets largely originates from their energy and resource (water conservation) counterparts. These observations underscore the prevalence of upside, downside, and tail risks from green stock markets, particularly following crisis events.

Suggested Citation

  • Mensi, Walid & Shafiullah, Muhammad & Vo, Xuan Vinh & Kang, Sang Hoon, 2022. "Spillovers and connectedness between green bond and stock markets in bearish and bullish market scenarios," Finance Research Letters, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003440
    DOI: 10.1016/j.frl.2022.103120
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    5. Lu, Xunfa & Huang, Nan & Mo, Jianlei & Ye, Zhitao, 2023. "Dynamics of the return and volatility connectedness among green finance markets during the COVID-19 pandemic," Energy Economics, Elsevier, vol. 125(C).
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    7. Gong, Xiao-Li & Zhao, Min & Wu, Zhuo-Cheng & Jia, Kai-Wen & Xiong, Xiong, 2023. "Research on tail risk contagion in international energy markets—The quantile time-frequency volatility spillover perspective," Energy Economics, Elsevier, vol. 121(C).
    8. Pham, Linh & Hao, Wei & Truong, Ha & Trinh, Hai Hong, 2023. "The impact of climate policy on U.S. environmentally friendly firms: A firm-level examination of stock return, volatility, volume, and connectedness," Energy Economics, Elsevier, vol. 119(C).
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    More about this item

    Keywords

    Green bonds; S&P 500 index; Quantile connectedness; COVID-19;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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