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Can we put green bonds in a single basket?

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  • Rehman, Mobeen Ur
  • Nautiyal, Neeraj
  • Zeitun, Rami
  • Vo, Xuan Vinh
  • Saleh Al-Faryan, Mamdouh Abdulaziz

Abstract

We examine the correlation between green bond markets of the UK, US, Japan, Canada, Australia, and Europe from 28th November 2008 to 21st May 2021. To measure time-varying correlation, we use extensions of conventional wavelets as wavelet multiple correlation and cross-correlation. Our results suggest sufficient diversification opportunities in the green bonds market because of their recent introduction into the existing asset classes. More specifically, low correlation is reported for UK GBs with Australian Canadian GBs, US GBs with Australian GBs, Japan and Canada, and European GBs with Canadian GBs across all investment periods. We also report non-linear bi-directional causality across the majority of the green bonds market. Our work suggests diversification opportunities by investing in green bonds based on their low time-varying correlation.

Suggested Citation

  • Rehman, Mobeen Ur & Nautiyal, Neeraj & Zeitun, Rami & Vo, Xuan Vinh & Saleh Al-Faryan, Mamdouh Abdulaziz, 2025. "Can we put green bonds in a single basket?," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001585
    DOI: 10.1016/j.najef.2025.102518
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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