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Diversification value of green Bonds: Fresh evidence from China

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  • Zhou, You
  • Lin, Lichao
  • Huang, Ziling

Abstract

This study conducts a comprehensive analysis of the static correlation between the Chinese green bond market and key capital markets-including the stock, money, foreign exchange, and gold markets—using daily data spanning from 2013 to 2022. Utilizing maximum likelihood estimation methods, our findings indicate that the Student’s t Copula model is the most suitable for capturing these relationships, revealing a relatively low static correlation among these markets. Furthermore, for dynamic dependence analysis and cross-validation, the Student’s t-GAS Copula model is applied, which corroborates the initial findings. Consequently, this suggests that the Chinese green bond market could become one of the potentially diversification options for investing in the Chinese financial landscape.

Suggested Citation

  • Zhou, You & Lin, Lichao & Huang, Ziling, 2024. "Diversification value of green Bonds: Fresh evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:ecofin:v:74:y:2024:i:c:s1062940824001797
    DOI: 10.1016/j.najef.2024.102254
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    More about this item

    Keywords

    China; Copula; Financial market; Green bonds; Diversification;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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