Connectedness between green bonds, conventional bonds, oil, heating oil, natural gas, and petrol: new evidence during bear and bull market scenarios

Walid Mensi, Refk Selmi, Sami Al-Kharusi, Houssem Eddine Belghouthi and Sang Hoon Kang

Resources Policy, 2024, vol. 91, issue C

Abstract: This study examines the spillovers between US green bonds, non-green bonds (10-year US Treasuries) and four major energy markets - West Texas Intermediate (WTI) crude oil, heating oil, natural gas, and petrol - during bear and bull market conditions. We combine the Diebold and Yilmaz (2012) spillover index and the quantile connectedness approach developed by Ando et al. (2022) in order to capture financial markets exhibiting higher potential risk and to assess their extreme dependence. The main results show a strong time-varying connectedness between focal asset classes during major crisis periods, including the oil price crash, the China-US trade conflict, the coronavirus crisis and the war between Russia and Ukraine. The network analysis reveals that WTI, heating oil and green bonds act as net transmitters of risk, while the other asset classes serve as net receivers of spillovers. In extreme conditions, spillovers between energy commodities, green bonds and non-green bonds are asymmetric, given that they are not equal in the upper and lower quantiles. Green bonds offer greater diversification benefits when coupled with WTI, heating oil, gasoline, and natural gas, though with varying portfolio weights.

Keywords: Green bonds; Non-green bonds; Energy markets; Extreme spillovers; Hedging (search for similar items in EconPapers)
JEL-codes: C40 F36 G14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:91:y:2024:i:c:s0301420724002551

DOI: 10.1016/j.resourpol.2024.104888

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