Factors behind the performance of green bond markets

Oluwasegun Adekoya (), Emmanuel J.A. Abakah, Johnson A. Oliyide and Luis Gil-Alana

International Review of Economics & Finance, 2023, vol. 88, issue C, 92-106

Abstract: The market for green bonds has grown dramatically over the past several years, necessitating an understanding of the variables that might forecast its performance. Studies on how the green bond market interacts with other markets are widely discussed in the literature, but little is known about the variables that improve predictions of green bond returns. In this study, we use data on commodity and financial asset prices, as well as speculative factors, to predict the returns on green bonds using the Feasible Quasi-Generalized Least Squares (FQGLS) and the causality-in-quantiles estimators. The findings demonstrate that most factors are significant predictors of the returns on green bonds, with speculative factors having a detrimental predictive influence, and commodity and financial asset prices having a mixed predictive impact. When asymmetries are taken into account, the asymmetric predictive model performs better at predicting the returns on green bonds than its symmetric counterpart in most instances. Finally, all the factors, except investors' sentiment, affect the returns on green bonds in a variety of market situations. The interdependence among the global financial and commodity markets, as well as economic uncertainties justify the established predictive influence, since green bonds are a component of the broader investment bonds.

Keywords: Green bond; Commodities; Financials; Uncertainties; Predictability (search for similar items in EconPapers)
JEL-codes: C2 C58 G10 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:92-106

DOI: 10.1016/j.iref.2023.06.015

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