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Dynamic risk spillovers between green bonds and energy markets: New evidence from the GARCH-MIDAS-D-Copula-CoVaR approach considering uncertainties

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  • Zheng, Hairong
  • Wang, Sikai
  • Zhang, Tingting

Abstract

The continuous rise in global economic policy uncertainty (EPU) and geopolitical risk (GPR) has intensified market volatility, altered investor preferences, impacted capital flows, and complicating the risk spillover between green bonds and energy markets. Existing research has not adequately addressed the impact of different uncertainties on risk contagion or analyzed the risk contagion characteristics between sub-markets. Therefore, this study first establishes a GARCH-MIDAS model that simultaneously considers EPU and GPR. Secondly, it breaks through the traditional binary risk research framework by employing a D-Copula model to characterize the nonlinear dependence between green bonds and various sub-markets. To achieve this, a new GARCH-MIDAS-D-Copula- CoVaR model was developed to dynamically describe the characteristics of risk spillover.The results show that the impact of different energy sub-markets on green bonds varies significantly, with the overall energy market exhibiting weaker risk spillover effects compared to individual sub-markets. Focusing on the outbreak of the COVID-19 pandemic, this study reveals the risk spillover characteristics between green bonds and energy markets during different periods, providing a new perspective for studying the risk spillover relationship between the two markets.

Suggested Citation

  • Zheng, Hairong & Wang, Sikai & Zhang, Tingting, 2025. "Dynamic risk spillovers between green bonds and energy markets: New evidence from the GARCH-MIDAS-D-Copula-CoVaR approach considering uncertainties," Renewable Energy, Elsevier, vol. 239(C).
    • Handle: RePEc:eee:renene:v:239:y:2025:i:c:s0960148124021979
    DOI: 10.1016/j.renene.2024.122129
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