The dynamic interaction between investor attention and green security market: an empirical study based on Baidu index

Yang Gao, Yangyang Li and Yaojun Wang

China Finance Review International, 2021, vol. 13, issue 1, 79-101

Abstract: Purpose - This paper aims to explore the interaction between investor attention and green security markets, including green bonds and stocks. Design/methodology/approach - This study takes the Baidu index of “green finance” as the proxy for investor attention and constructs several generalized prediction error variance decomposition models to investigate the interdependence. It further analyzes the dynamic interaction between investor attention and the return and volatility of green security markets using the rolling time window. Findings - The empirical analysis and robustness test results reveal that the spillovers between investor attention and the return and volatility of the green bond market are relatively stable. In contrast, the spillover level between investor attention and the green stock market displays significant time-varying and asymmetric effects. Moreover, the volatility spillover between investor attention and green securities is vulnerable to major financial events, while the return spillover is extremely sensitive to market performance. Originality/value - The conclusion further expands the practical application and theoretical framework of behavioral finance in green finance and provides a new reference for investors and regulators. Besides, this study also lays a theoretical basis for investors to focus on the practical application of volatility prediction and risk management in green securities.

Keywords: Generalized forecast error variance decomposition; Investor attention; Interaction effect; Green bond; Green stock (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:cfri-06-2021-0136

DOI: 10.1108/CFRI-06-2021-0136

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