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Dependence and hedging between green bonds and clean energy sub-markets in China: Insights from time–frequency wavelet approaches

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  • Deng, Jing
  • Liu, Yejiao
  • Xing, Xiaoyun

Abstract

This paper examines the time–frequency dependence between green bonds and clean energy subsector stocks in China, as well as the diversification strategies of relevant investors. Furthermore, this paper considers the impact of the pandemic on diversification strategies. Based on the wavelet coherence and wavelet phase difference analysis, the results indicate that the dependence among green bonds and clean energy varies significantly across scales and clean energy stock market sub-sectors. Besides, various clean energy subsector stocks lead green bonds in the long term. Then, this paper applies the wavelet-transformed data to estimate hedge ratios and hedge effectiveness at different wavelet scales. The clean energy categories and the investment horizon would affect the cost and hedging effectiveness when hedging clean energy stocks with green bonds, and the hedging effectiveness rises with the increase of the scales. Furthermore, the hedging costs vary significantly with various subsector stocks at all investment horizons in the aftermath of the pandemic. These results contribute to environmentally friendly investors and policymakers by considering the clean energy sub-categories at different frequencies.

Suggested Citation

  • Deng, Jing & Liu, Yejiao & Xing, Xiaoyun, 2025. "Dependence and hedging between green bonds and clean energy sub-markets in China: Insights from time–frequency wavelet approaches," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001083
    DOI: 10.1016/j.asieco.2025.101984
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    Keywords

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    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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