Time and frequency connectedness of green equity indices: Uncovering a socially important link to Bitcoin

Green investment funds continue to interest as a sustainable non-conventional asset class. We examine their interconnectedness, using network and wavelet analyses, with both traditional and non-traditional financial assets. Results indicate that global stock market performance, along with the returns of emerging markets, commodity markets, and FinTech are strongly correlated with green indices. However, in comparison, Bitcoin is found to be isolated, as confirmed by wavelet analyses. When considering the evolution of green investment indices, their role as diversifiers to Bitcoin is especially interesting, suggesting many potential benefits for investors and policymakers. Perhaps the most prominent application of our results is for Bitcoin investors to consider more closely investing in green funds as an offset to concerns about the negative environmental consequences of investing in proof-of-work cryptocurrencies.

Automated summary

Green investment funds are strongly correlated with global stock market performance, emerging markets, commodity markets, and FinTech, while Bitcoin is found to be isolated. The results suggest that green investment indices can serve as diversifiers to Bitcoin and bring many potential benefits for investors and policymakers.