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Volatility Spillovers between Equity and Green Bond Markets

Author

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  • Daehyeon Park

    (College of Economics, Sungkyunkwan University, Seoul 03063, Korea)

  • Jiyeon Park

    (College of Economics, Sungkyunkwan University, Seoul 03063, Korea)

  • Doojin Ryu

    (College of Economics, Sungkyunkwan University, Seoul 03063, Korea)

Abstract

This study examines the market for green bonds, which have been in the spotlight as an eco-friendly investment product. We analyze the volatility dynamics and spillovers between the equity and green bond markets. As the return dynamics of financial products typically exhibit asymmetric volatility, we check whether green bonds also share this property. Our analyses confirm that although green bonds do exhibit the asymmetric volatility phenomenon, their volatility, unlike that of equity, is also sensitive to positive return shocks. An analysis of the association between the green bond and equity markets confirms that although the two markets have some volatility spillover effects, neither responds significantly to negative shocks in the other market.

Suggested Citation

  • Daehyeon Park & Jiyeon Park & Doojin Ryu, 2020. "Volatility Spillovers between Equity and Green Bond Markets," Sustainability, MDPI, vol. 12(9), pages 1-12, May.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:9:p:3722-:d:353863
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    as
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    More about this item

    Keywords

    ; asymmetric volatility; Baba–Engle–Kraft–Kroner model; dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity; green bond; sustainable growth; ; G10; G11; Q56;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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