Navigating the Green Frontier: Unveiling Investor Strategies in Green Bond Market vs. Traditional Markets
subject: Bonds; Climate risk; GARCH models; Green bond; Index; Investment; Investor strategies; Leverage; Portfolio; Return; Risk; S&P 500; Sustainable development; Sustainable finance; Traditional markets; Volatility
description: Green bonds have emerged as a key instrument in sustainable finance, but their risk-return profile remains poorly understood. This study examines the risk-return profile of green bonds compared to traditional markets over a midterm investment horizon. Daily closing prices of five indices (S&P Green Bond Index, S&P 500 Index, S&P GSCI Gold Index, S&P Global Clean Energy Index, and S&P 500 Carbon Efficient Index) from August 2021 to August 2024 were analysed using descriptive statistics and GARCH (1, 1) models. Green bonds exhibit higher volatility persistence and leverage effects compared to traditional markets. There is a significant positive correlation between the S&P Green Bond Index and the S&P Global Clean Energy Index. The S&P GSCI Gold Index exhibits low volatility and no significant leverage effects. Investors should consider the unique risk-return profile of green bonds when constructing portfolios. Portfolio managers should employ sector-specific risk management strategies. Policymakers should consider the potential benefits of green bonds in promoting sustainable finance and mitigating climate risk. This study contributes to the growing body of research on green finance and sustainable investing, providing valuable insights into the midterm risk-return dynamics of green bonds. 2025, Bentham Books imprint.
creator: Kumar, Magesh; Rashmi, B.H.; Devi, Siamala
source: Computational Modelling Approaches to FinTech Innovation;pp.255-277
publisher: Bentham Science Publishers
date: 01-01-2025
rights: Restricted Access; Hardcopy may be available in the library
relation: ISBN: 979-889881081-8; 979-889881083-2;
language: English
type: Book chapter
coverage: Kumar M., School of Business and Management, CHRIST University, Bengaluru, India; Rashmi B.H., School of Business and Management, CHRIST University, Bengaluru, India; Devi S., Sri Eshwar College of Engineering, Tamil Nadu, Coimbatore, India