Diversifier or More? Hedge and Safe Haven Properties of Green Bonds During COVID-19

Muhammad Arif, Muhammad Abubakr Naeem, Saqib Farid, Rabindra Nepal, Tooraj Jamasb

Research output: Working paperResearch

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Abstract

The COVID-19 pandemic represents a global case of the fragility of the financial markets and vulnerability of natural disasters and exceptional risks. Against the backdrop of the COVID-19 pandemic, this study explores the ‘hedging’ and ‘safe-haven’ potential of green bonds for conventional equity, fixed income, commodity, and forex investments. Our results show that the green bond index could serve as a diversifier asset for medium- and long-term equity investors. It can also serve as a hedging and safe haven instrument for currency and commodity investments. This study is the first to provide evidence on the hedging and safe-haven potential of green bonds during the COVID-19 pandemic. Our findings imply that green bonds could play a constructive role in global financial recovery efforts without compromising the low-carbon transition targets as they can also be a source of finance for green energy.
Original languageEnglish
Place of PublicationCopenhagen
PublisherCopenhagen School of Energy Infrastructure
Number of pages2
DOIs
Publication statusPublished - 2021
SeriesCSEI Policy Brief
Number10

Keywords

  • Green bonds
  • Hedge
  • Safe-haven
  • Cross-quantilogram
  • COVID-19

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