Time-varying relation between black and green bond price benchmarks: Macroeconomic determinants for the first decade

David C. Broadstock; Louis T.W. Cheng

doi:10.1016/j.frl.2019.02.006

Time-varying relation between black and green bond price benchmarks: Macroeconomic determinants for the first decade

David C. Broadstock, Louis T.W. Cheng

The Hong Kong Polytechnic University

Research output: Journal article publication › Journal article › Academic research › peer-review

206 Citations (Scopus)

Abstract

We examine the determinants of correlation patterns between green and black bond markets. Both the correlations and determinants are time-varying and estimated using a two-stage sequential methodology, extracting dynamic conditional correlations (DCC) in the first, then applying dynamic model averaging (DMA) in the second to establish the determinants of market correlations. We provide evidence that the connection between green and black bonds is sensitive to: changes in financial market volatility; economic policy uncertainty; daily economic activity; oil prices and; uniquely constructed measures of positive and negative news-based sentiment towards green bonds.

Original language	English
Pages (from-to)	17-22
Number of pages	6
Journal	Finance Research Letters
Volume	29
DOIs	https://doi.org/10.1016/j.frl.2019.02.006
Publication status	Published - Jun 2019

Keywords

Dynamic determinants
Green bonds
Market sentiment
Textual analysis
Time-varying correlations

ASJC Scopus subject areas

Finance

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10.1016/j.frl.2019.02.006

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abstract = "We examine the determinants of correlation patterns between green and black bond markets. Both the correlations and determinants are time-varying and estimated using a two-stage sequential methodology, extracting dynamic conditional correlations (DCC) in the first, then applying dynamic model averaging (DMA) in the second to establish the determinants of market correlations. We provide evidence that the connection between green and black bonds is sensitive to: changes in financial market volatility; economic policy uncertainty; daily economic activity; oil prices and; uniquely constructed measures of positive and negative news-based sentiment towards green bonds.",

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AB - We examine the determinants of correlation patterns between green and black bond markets. Both the correlations and determinants are time-varying and estimated using a two-stage sequential methodology, extracting dynamic conditional correlations (DCC) in the first, then applying dynamic model averaging (DMA) in the second to establish the determinants of market correlations. We provide evidence that the connection between green and black bonds is sensitive to: changes in financial market volatility; economic policy uncertainty; daily economic activity; oil prices and; uniquely constructed measures of positive and negative news-based sentiment towards green bonds.

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KW - Market sentiment

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Time-varying relation between black and green bond price benchmarks: Macroeconomic determinants for the first decade

Abstract

Keywords

ASJC Scopus subject areas

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