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Did green debt instruments aid diversification during the COVID-19 pandemic?

Author

Listed:
  • Paresh Kumar Narayan

    (Monash University)

  • Syed Aun R. Rizvi

    (Lahore University of Management Sciences)

  • Ali Sakti

    (Bank Indonesia)

Abstract

Faced with a persistent pandemic, investors are concerned about portfolio diversification. While the literature on COVID-19 has evolved impressively, limited work remains on diversification opportunities. We contribute to the literature by exploring the volatility and co-movement of different sovereign debt instruments, including green sukuk, sukuk, bond and Islamic and conventional equity indices for Indonesia. Our results consistently point towards increased asset co-movement and weak profitability during the pandemic. Interestingly, sukuk and green sukuk have a 14% correlation with stocks, suggesting potential diversification prospects in times of extreme shocks.

Suggested Citation

  • Paresh Kumar Narayan & Syed Aun R. Rizvi & Ali Sakti, 2022. "Did green debt instruments aid diversification during the COVID-19 pandemic?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-15, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-021-00331-4
    DOI: 10.1186/s40854-021-00331-4
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    2. Emre Arat & Britta Hachenberg & Florian Kiesel & Dirk Schiereck, 2023. "Greenium, credit rating, and the COVID-19 pandemic," Journal of Asset Management, Palgrave Macmillan, vol. 24(7), pages 547-557, December.
    3. Lalwani, Vaibhav, 2024. "Incorporating green assets in equity portfolios," Finance Research Letters, Elsevier, vol. 59(C).
    4. Duan, Kun & Liu, Yang & Yan, Cheng & Huang, Yingying, 2023. "Differences in carbon risk spillovers with green versus traditional assets: Evidence from a full distributional analysis," Energy Economics, Elsevier, vol. 127(PA).
    5. Nevi Danila, 2023. "The Asymme The Asymmetric Ex Tric Exchange Ra Ange Rate Pass-Through T Ass-Through To Inflation In The Selected Asean Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(1), pages 125-144, March.
    6. Faaza Fakhrunnas & Rindang Nuri Isnaini Nugrohowati & Razali Haron & MB Hendrie Anto, 2023. "The Asymmetric Relationship Between Macroeconomic Determinants And Nonperforming Loans: Evidence From The Banking Industry Of Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(1), pages 145-174, March.
    7. Chang, Chiu-Lan, 2024. "Extreme events, economic uncertainty and speculation on occurrences of price bubbles in crude oil futures," Energy Economics, Elsevier, vol. 130(C).

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    More about this item

    Keywords

    COVID-19; Green Sukuk; Indonesia Capital market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other

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