Market volatilities vs oil shocks: Which dominate the relative performance of green bonds?

Wei, Yu, Shi, Chunpei, Zhou, Chunyan, Wang, Qian, Liu, Yuntong and Wang, Yizhi 2024. Market volatilities vs oil shocks: Which dominate the relative performance of green bonds? Energy Economics 136 , 107709. 10.1016/j.eneco.2024.107709 Item availability restricted.

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Abstract

The market performance of green bonds determines whether they will make a significant contribution to future financial markets and sustainable investment. It is therefore important to conduct a thorough study of the dominant factors affecting the market performance of green bonds, particularly their performance relative to conventional bonds. Thus, the main objective of this paper is to investigate and compare the impact of market volatilities (mainly VIX, OVX, and MOVE) and oil shocks (including supply shock, demand shock, and speculative demand shock) on the relative performance of green bonds. The main findings indicate that when volatilities coincide with oil shocks, the former consistently exert a more pronounced influence on the relative performance of green bonds. This phenomenon is particularly evident in the post-COVID-19 period. Concerning crude oil shocks, oil supply and demand shocks have opposite effects on the relative performance of green bonds, with the supply shock having a negative impact and the demand shock having a positive impact. Furthermore, our analysis shows that volatilities and oil shocks tend to have significant effects on the relative performance of green bonds during periods of heightened market risk aversion, while their impact remains negligible in a stable market environment. The empirical results may provide novel insights and significant implications for the further development of the green bond market.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0140-9883
Date of First Compliant Deposit:	2 October 2024
Date of Acceptance:	4 June 2024
Last Modified:	07 Nov 2024 14:00
URI:	https://orca.cardiff.ac.uk/id/eprint/172546

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