Return connectedness of green bonds and financial investment channels in China: Implications for hedging and regulation

Danyang Xu, Yang Hu, Shaen Corbet and Chunlin Lang

Research in International Business and Finance, 2024, vol. 70, issue PA

Abstract: Using a TVP-VAR frequency connectedness approach, this study examines the return connectedness of green bonds with several major investment markets (e.g. index exchange-traded funds, oil, gold and currency) from the perspective of Chinese investors. The main results indicate that the connectedness of green bonds with other assets is relatively low and typically serves as a receiver in the network. However, during the epidemic period, the connectedness has obviously fluctuated, and green bonds briefly acted as a shock transmitter. This study also employs portfolio construction methods, and the portfolio analysis also demonstrates that green bonds can act as an efficient hedging tool. Our portfolio results can help market participants and policymakers better understand different Chinese financial markets and develop strategies to mitigate market risks.

Keywords: Green bonds; Return connectedness; Portfolios; China; Diversification (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924001223

DOI: 10.1016/j.ribaf.2024.102329

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