Uncertainties and green bond markets: Evidence from tail dependence

Motivated by a lack of studies related to macro risk‐driven green bond markets, this paper detects the tail dependence of the USA and China green bond markets on three uncertainty indicators. We applied a novel cross‐quantilogram method to address this issue and utilised the quantile causality test for robustness, as well as to capture predictive causalities. The results show that three selected uncertainty indicators are important drivers for the returns and volatilities of green bond markets. However, all three indicators play different roles in the two nations. The most influential determinant of US green bonds is financial uncertainty, whereas in China, it is economic policy uncertainty. Additionally, the impact on green bond returns varies in different market states, and green bond volatilities may respond abnormally to extreme increasing changes in these uncertainties. These findings imply the unique financial characteristics of two green bond markets and heterogeneities between different countries. The corresponding investment implications and policy significance are discussed in detail in the concluding section.