Exploring hedging potentials of green bonds against oil price shocks: Evidence from quantile-on-quantile connectedness measures

Xudong Lin, Yiqun Meng and Hao Zhu

Finance Research Letters, 2024, vol. 65, issue C

Abstract: We examine the quantile-on-quantile transmission mechanism between oil price shocks and green bonds. By disentangling oil price shocks and employing the QQ connectedness approach, we find that green bonds exhibit great potential in hedging against oil price shocks under normal market conditions, and better hedging performances during extreme market conditions. China's green bond market demonstrates superior resilience against oil price shocks compared to its U.S. counterpart. Additionally, we document significant differences between directly related and indirectly related connectedness, especially when the negative correlation is substantial, emphasizing the importance of examining both types of connectedness when assessing hedging performances.

Keywords: Oil price shocks; Green bond market; Dynamic connectedness; Quantile-on-quantile (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324006706

DOI: 10.1016/j.frl.2024.105640

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