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Price discovery of climate risk and green bonds: A dynamic information leadership share approach

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  • Hou, Yang (Greg)
  • Xu, Danyang
  • Oxley, Les
  • Goodell, John W.

Abstract

This study investigates the price discovery of a novel stock market climate risk indicator, measured by the Morgan Stanley Capital International Climate Change Index (MSCI CCI) and global green bond indices. A time-varying information leadership share (ILS) measure assesses dynamic price discovery performance of the MSCI CCI and green bonds. We find that the MSCI CCI index dominates in the price discovery process in terms of time-varying ILS, despite the static result indicating the opposite. Further, the outbreak of the COVID-19 pandemic had restrictively positive effects on price discovery as the crisis progressed.

Suggested Citation

  • Hou, Yang (Greg) & Xu, Danyang & Oxley, Les & Goodell, John W., 2024. "Price discovery of climate risk and green bonds: A dynamic information leadership share approach," Finance Research Letters, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324011279
    DOI: 10.1016/j.frl.2024.106098
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    More about this item

    Keywords

    Price discovery; Green bonds; Climate risk; Information leadership share; VEC-DCC-GARCH model;
    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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