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Liquidity risk and yield spreads of green bonds

Author

Listed:
  • Wulandaria, Febi

    (Jönköping International Business School)

  • Schäfer, Dorothea

    (German Institute for Economic Research DIW Berlin)

  • Stephan, Andreas

    () (The Ratio Institute)

  • Sun, Chen

    (CERBE)

Abstract

This study analyses how liquidity risk affects bonds’ yield spreads after controlling for credit risk, bond-specific characteristics and macroeconomic variables. Using two liquidity estimates, LOT liquidity and the bid-ask spread, we find that, in particular, the LOT liquidity measure has explanatory power for the yield spread of green bonds. Overall, however, the impact of LOT decreases over time, implying that, nowadays liquidity risk is negligible for green bonds.

Suggested Citation

  • Wulandaria, Febi & Schäfer, Dorothea & Stephan, Andreas & Sun, Chen, 2018. "Liquidity risk and yield spreads of green bonds," Ratio Working Papers 305, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0305
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    1. repec:eee:jbfina:v:98:y:2019:i:c:p:39-60 is not listed on IDEAS
    2. repec:gam:jsusta:v:11:y:2019:i:4:p:1098-:d:207377 is not listed on IDEAS

    More about this item

    Keywords

    Green Bond; Liquidity Risk; Yield Spread; Sustainable Investment; Fixed Income Security; Financial Innovation;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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