Do Uncertainty Indicators Affect the Volatility of Green Bonds?
Kari Hietakangas () and
Anupam Dutta ()
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Kari Hietakangas: KPMG
Anupam Dutta: University of Vaasa
Chapter Chapter 26 in The Palgrave Handbook of Green Finance for Sustainable Development, 2024, pp 695-722 from Palgrave Macmillan
Abstract:
Abstract Growing awareness of climate and environment concerns during the last two decades has induced a positive trend for socially responsible investing. One of these new sustainable investing instruments is the so-called green bond, which represents a fixed-income instrument established to raise money for environmentally friendly projects. This book chapter explores the impact of changes in various uncertainty indices and the realized volatility of the green bond market. The uncertainty indices include the implied stock market volatility index (VIX), the implied oil market volatility index (OVX), the global economic policy uncertainty index (GEPU), the geopolitical risk index (GPR), and the daily infectious disease equity market volatility tracker (EMVID). Green bond price data are presented by the iShares USD Green Bond ETF (BGRN) and the VanEck Green Bond ETF (GRNB). The sample period is 3.12.2018–28.2.2023. Given that most of the uncertainty indices are available at the monthly frequency and the realized volatility of the green bond markets is computed at the daily frequency, the method used in the analysis consists of the mixed-data-sampling (MIDAS) regression. The results indicate a statistically significant positive relationship between changes in oil implied volatility index and the realized volatility of green bonds, whereas the green bond market volatility does not seem to significantly react to changes in uncertainties about macroeconomic conditions, geopolitics, or stock market volatility.
Keywords: Green bonds; Uncertainties; Realized volatility; MIDAS model; Sustainability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-031-65756-6_26
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DOI: 10.1007/978-3-031-65756-6_26
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