Extreme Connectedness between Green Bonds, Government Bonds, Corporate Bonds and Other Asset Classes: Insights for Portfolio Investors

This paper aims to examine the connectedness between green and conventional assets, particularly during the period of economic downturn. Specifically, we examine quantile-based time-varying connectedness between the green bond market and other financial assets using quantile vector autoregression (QVAR) from 9 March 2018 to 10 March 2021. We use daily prices of S&P U.S. Treasury Bond Index, S&P US Aggregate Bond Index, S&P US Treasury Bond Current 10Y Index, S&P 500 Bond Index, S&P 500 Financials index, S&P 500 Energy Bond Index and S&P 500, giving a total of 784 observations, and using Composite Index as a representative of conventional assets classes and S&P Green Bond Index to denote the green bond market. Results shows the connectedness between green bonds and the conventional asset classes intensified during the outbreak of the Coronavirus pandemic (COVID-19) as investors shifted their investment towards fixed income assets due to the plunge in the prices of stocks and commodities. The results also shows that green bonds are strongly connected with treasury bonds, aggregate bonds and bond index, as they share similarities with respect to issuance, risk and governance. Connectedness is weak in the case of composite index and energy bond index, as their prices do not have substantial influence on the green bond market. The study highlights the hedging and diversification benefits of green bonds. We have several implications for portfolio managers, policy makers and researchers.

A comparative analysis of the financialization of commodities during COVID-19 and the global financial crisis using a quantile regression approach.

The paper aims at studying the financialization of commodities during coronavirus pandemic, thereafter referred as COVID19 and comparing the same with global financial crisis, thereafter referred as GFC. The connectedness among energy commodities particularly after 2020 was found strong, the effect is medium in case of metals and least in case of agriculture commodities. The findings proved that the financialization of commodities during COVID 19 was much strong as compared to GFC. An investigation of comparative analysis of financialization in developed countries and developing countries is also made, which indicates that connectedness is strong in developed countries as compared to developing countries. The findings reveal the effects were less significant from 2010 to 2019. Gold has significant effect with stock market during COVID 19 and GFC period, marking it a safe haven asset during crisis. Overall, the findings cast doubt on the hedging properties of energy commodities. The finding also indicates the COVID 19 had a deeper impact as compared to GFC.

Green Bonds and Commodities: A New Asymmetric Sustainable Relationship

In this study we examine the relationship between corporate green bonds and commodities (both perishable & non-perishable) that attracts very little attention in relative literature. For the first time, we investigate a long-term relationship between green bonds and commodities including a significantly higher number of commodities and observations. Furthermore, we adopt a novel methodology, the VaR (value at risk) based copulas, to describe the asymmetric risk spillover between green bonds and commodities by considering the asymmetric tail distribution. Our results reveal an insignificant risk spillover effect from commodity market uncertainty. Further, we found non-perishable commodities are transmitting risk to perishable commodities (barring lead). In addition, in contrast to other similar studies the risk spillover is comparatively higher regarding lead, gold, and agriculture commodities as against copper and silver. On the other hand, energy commodities have the least spillover effect. Finally, these results have several important implications for investors as well as for policymakers.