Journal
FINANCE RESEARCH LETTERS
Volume 29, Issue -, Pages 17-22Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2019.02.006
Keywords
Green bonds; Time-varying correlations; Dynamic determinants; Market sentiment; Textual analysis
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Funding
- National Natural Science Foundation of China (NSFC) [71573214]
- 111 Project [B16040]
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We examine the determinants of correlation patterns between green and black bond markets. Both the correlations and determinants are time-varying and estimated using a two-stage sequential methodology, extracting dynamic conditional correlations (DCC) in the first, then applying dynamic model averaging (DMA) in the second to establish the determinants of market correlations. We provide evidence that the connection between green and black bonds is sensitive to: changes in financial market volatility; economic policy uncertainty; daily economic activity; oil prices and; uniquely constructed measures of positive and negative news-based sentiment towards green bonds.
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