Going green: Do green bonds act as a hedge and safe haven for stock sector risk?

Monika Chopra and Chhavi Mehta

Finance Research Letters, 2023, vol. 51, issue C

Abstract: The paper documents the hedging and safe haven benefits of green bonds in equities using the dynamic conditional correlation approach. Green bonds act as a strong hedge for eleven stock sectors in the USA. Additionally, they demonstrate a strong safe haven property with high-emission sectors for the entire study period and with all sectors except financials during the COVID-19 period. Interestingly, this hedging and safe haven benefit of green bonds is agnostic of the environmental disclosure score of a firm. Hence, investors can add green bonds to hedge their equity portfolios regardless of the environmental consciousness of their portfolio firms.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005335

DOI: 10.1016/j.frl.2022.103357

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