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Dynamics of green and conventional bond markets: Evidence from the generalized chaos analysis

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  • Vogl, Markus
  • Kojić, Milena
  • Mitić, Petar

Abstract

In this study, we conduct a comparative analysis of the nonlinear dynamics of the time series data for green and conventional bond indices spanning the period from 2014 to 2023. Our research builds upon the existing limited studies conducted in this domain. To examine the inherent characteristics of the empirical data-generating process, we utilize a generalized chaos analysis framework. The findings indicate that both series exhibit a combination of quasi-periodic cycles and deterministic (chaotic) dynamics. Additionally, we employ reconstruction techniques to visualize the strange (fractal) system attractors for both series. Furthermore, we quantify and compare the dynamics that emerge from the data by employing recurrence quantification analysis and multifractal analysis with power-law distributional coherence tests. Consequently, we identify that both bond series exhibit multifractal characteristics. Finally, we conduct a comparative analysis of the distinct dynamical differences observed between the bond index series. Based on our results, we draw concluding remarks regarding the future evolution of the green bond market and discuss the potential implications of our findings in the context of climate change.

Suggested Citation

  • Vogl, Markus & Kojić, Milena & Mitić, Petar, 2024. "Dynamics of green and conventional bond markets: Evidence from the generalized chaos analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 633(C).
    • Handle: RePEc:eee:phsmap:v:633:y:2024:i:c:s0378437123009524
    DOI: 10.1016/j.physa.2023.129397
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    Keywords

    Green bonds versus conventional bonds; Chaos analysis framework; Strange (fractal) attractor reconstruction; Multifractal analysis; Power-law distribution coherence test; Green bond market dynamics; Climate change implications;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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