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Green bonds and oil price shocks and uncertainty: A safe haven analysis

Author

Listed:
  • Khaled Mokni
  • Walid Mensi
  • Shawkat Hammoudeh
  • Ahdi Noomen Ajmi

Abstract

This paper investigates the hedge and safe-haven properties of green bonds (GBs) performing as a safeguard against oil price shocks and uncertainty, in comparison to the corresponding roles of gold, the 3-month European government bills, and the U.S. 3-Month T. bills. Oil price shocks are disentangled into oil supply, oil demand, and oil risk shocks based on the recent methodology of Ready (2018), generated in a framework that includes gold, oil shocks, and oil uncertainty (OVX). The ability of GBs to protect against oil price shocks and oil uncertainty is examined using the GARCH and quantile regression (QR) models. The results show that GBs are more appropriate than gold and conventional bonds (CBs) as hedging and safe haven tools against oil price shocks and oil uncertainty. Besides, the ability of GBs to protect against oil price shocks and uncertainty depends on whether the oil shocks are supply, demand, or risk shocks. Furthermore, we find that GBs serve as a strong hedge and/or a safe haven against structural oil shocks generally under bearish GBs market conditions. The European government bills and the US T. bills play the role of weak hedge and a safe haven asset against oil uncertainty and oil shocks. This role varies across quantiles (bear and bull market conditions). Relevant risk management implications are discussed.

Suggested Citation

  • Khaled Mokni & Walid Mensi & Shawkat Hammoudeh & Ahdi Noomen Ajmi, 2022. "Green bonds and oil price shocks and uncertainty: A safe haven analysis," International Economics, CEPII research center, issue 172, pages 238-254.
    • Handle: RePEc:cii:cepiie:2022-q3-172-16
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    Cited by:

    1. Mohammad Enamul Hoque & M. Kabir Hassan & Luca Pezzo, 2024. "Managing risk and reaping rewards: Climate‐change futures as a game‐changer for energy futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(8), pages 1338-1356, August.
    2. Mao, Qian & Ma, Xinyuan & Sun, Yunpeng, 2023. "Study of impacts of blockchain technology on renewable energy resource findings," Renewable Energy, Elsevier, vol. 211(C), pages 802-808.
    3. Mensi, Walid & Rehman, Mobeen Ur & Al-Yahyaee, Khamis Hamed & Vo, Xuan Vinh, 2023. "Frequency dependence between oil futures and international stock markets and the role of gold, bonds, and uncertainty indices: Evidence from partial and multivariate wavelet approaches," Resources Policy, Elsevier, vol. 80(C).
    4. Mensi, Walid & Vo, Xuan Vinh & Ko, Hee-Un & Kang, Sang Hoon, 2023. "Frequency spillovers between green bonds, global factors and stock market before and during COVID-19 crisis," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 558-580.

    More about this item

    Keywords

    Green bonds; Gold; Oil shocks; Oil uncertainty; Hedging; Safe haven;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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