Interactions between sustainable bonds, renewable energy and other financial markets: A macroprudential perspective
Year: 2024
Type: article
Abstract: We analyse linkages between sustainable bond markets and a number of key financial markets in Europe, namely corporate bond, sovereign bond, renewable energy, equity and volatility markets. We apply a novel empirical approach using zero-volatility spreads (z-spreads) as a measure of relative bond performance to adjust for the sensitivity of bond prices to changes in interest rates. We model these linkages using a Markov-switching vector autoregressive model and static and dynamic copulas that enable us to test for contagion with conditional value-at-risk measures. We find evidence of bi-directional contagion between the sustainability-linked bond and green bond markets along with contagion between other fixed-income markets and the sustainable bond market. Our results indicate possible diversification benefits that green bonds or sustainability-linked bonds may provide to investors active in the key markets analysed.
Source: Energy Economics
Authors: Lisa Sheenan, Koen Schweers, Tony Klein
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,680
OpenAlex ID: W4401817571