“My Name Is Bond. Green Bond.” Informational Efficiency of Climate Finance Markets

Marc Gronwald and Sania Wadud ()

No 11029, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the informational efficiency of green bond markets using a recently introduced quantitative measure for market inefficiency. The methodology assesses the deviation of observed asset price behavior from the Random Walk benchmark, which represents an efficient market. The main findings of the analysis are as follows: the degree of informational inefficiency of the green bond market is generally found to be very similar to that of benchmark bond markets such as treasury bond markets. For extensive periods, what is more, it is even found to be less inefficient. Overall, the price developments in green bond markets are very similar to those in the benchmark bond markets. In other words, fundamental factors that drive bond prices in general also drive prices for green bonds. It is worth pointing out, however, that the degree of inefficiency of the green bond market during the Covid outbreak in 2020 and the inflation shock in 2022/2023 is lower than that of the treasury bond market.

Keywords: green bonds; efficient market hypothesis; fractional integration (search for similar items in EconPapers)
JEL-codes: C22 E30 G14 Q02 Q31 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env, nep-fdg and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11029

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