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Volatility Spillovers between Equity and Green Bond Markets

Daehyeon Park (), Jiyeon Park () and Doojin Ryu ()
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Daehyeon Park: College of Economics, Sungkyunkwan University, Seoul 03063, Korea
Jiyeon Park: College of Economics, Sungkyunkwan University, Seoul 03063, Korea
Doojin Ryu: College of Economics, Sungkyunkwan University, Seoul 03063, Korea

Sustainability, 2020, vol. 12, issue 9, 1-12

Abstract: This study examines the market for green bonds, which have been in the spotlight as an eco-friendly investment product. We analyze the volatility dynamics and spillovers between the equity and green bond markets. As the return dynamics of financial products typically exhibit asymmetric volatility, we check whether green bonds also share this property. Our analyses confirm that although green bonds do exhibit the asymmetric volatility phenomenon, their volatility, unlike that of equity, is also sensitive to positive return shocks. An analysis of the association between the green bond and equity markets confirms that although the two markets have some volatility spillover effects, neither responds significantly to negative shocks in the other market.

Keywords: asymmetric volatility; Baba–Engle–Kraft–Kroner model; dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity; green bond; sustainable growth; G10; G11; Q56 (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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