Extreme risk dependence between green bonds and financial markets

The current study investigates the extreme risk dependence between green bonds and financial markets by employing the dual approaches of time‐varying optimal copula and extreme risk spillover analysis of dynamic conditional Value‐at‐Risk. We report significant symmetric (asymmetric) tail‐dependent c...

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Bibliographic Details
Published in:European financial management : the journal of the European Financial Management Association 2024-03, Vol.30 (2), p.935-960
Main Authors: Karim, Sitara, Lucey, Brian M., Naeem, Muhammad A., Yarovaya, Larisa
Format: Article
Language:English
Subjects:
CoVaR
COVID-19
Diversification
financial markets
green bonds
Hedging
Markets
Policy making
TVOC
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Summary:The current study investigates the extreme risk dependence between green bonds and financial markets by employing the dual approaches of time‐varying optimal copula and extreme risk spillover analysis of dynamic conditional Value‐at‐Risk. We report significant symmetric (asymmetric) tail‐dependent copulas in the upper (lower) tails characterizing independent regimes. Green bonds offer sufficient diversification, safe‐haven, and hedging opportunities during stable and distressing times to financial markets. The extreme risk spillovers revealed that COVID‐19 transformed the spillovers between green bonds and financial markets except Bitcoin. We proposed insightful implications for policymakers, governments, investors, and portfolio managers to relish the findings for their investment avenues.
ISSN:1354-7798
1468-036X
DOI:10.1111/eufm.12458