The intersection of security attributes of national debt and socially responsible investment objectives

Yang Liu, Aihua Wang and Rong Tan

Journal of International Money and Finance, 2025, vol. 152, issue C

Abstract: Amidst the backdrop of globalization, the deepening economic interdependence among nations is unmistakable. The government bond market, a crucial element of the financial system, carries profound implications for socially responsible investments (SRI) owing to its stability and security. Focusing on the spillover of government bond yields, this study employs the QVAR model’s generalized variance decomposition method to assess the spillover effects of long-term and short-term government bond yields under different extreme states. The terms “spillover” and “spillback” are respectively used to denote of the government bond market, thereby assessing the safety attributes of government bond assets. Additionally, a panel model is constructed to examine whether economic interconnectedness is a primary factor in the risk resistance and transfer capability of the government bond market. The results indicate that, first, under extreme states, the capacity to resist the risk of the government bond market is weaker than in normal states, In comparison, the capacity to transfer risk is stronger, reflecting structural changes in the security attributes of government bond assets. Secondly, considering the resilience of government bonds to risk, both short-term and long-term government bonds in various nations demonstrate enhanced safety attributes under high-risk circumstances compared to low-risk scenarios. Regarding their capacity to transfer risk, the safety attributes of short-term government bonds tend to vary, whereas long-term government bonds exhibit more robust safety features under low-risk conditions. Third, the level of economic correlation serves as a prospective indicator for identifying the safety attributes of the government bond market, exerting a significant influence on both the capacity to resist risk and the capacity to transfer risk of the government bond market. Each economy should persistently deepen its comprehension of economic interconnections within the context of globalization, augment the safety and allure of government bond assets, and perpetually refine investment portfolios to bolster their risk resilience and transfer. This will attract more socially responsible investors, thereby providing financial support and risk mitigation for sustainable development.

Keywords: Socially responsible investing (SRI); Spillover effects; Extreme states; Economic interconnectedness (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:152:y:2025:i:c:s0261560624002523

DOI: 10.1016/j.jimonfin.2024.103265

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