TY - JOUR
T1 - Green bonds and oil price shocks and uncertainty: A safe haven analysis
T2 - A safe haven analysis
AU - Mokni, Khaled
AU - Mensi, Walid
AU - Hammoudeh, Shawkat
N1 - Publisher Copyright:
© 2022 CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), a center for research and expertise on the world economy
PY - 2022
Y1 - 2022
N2 - This paper investigates the hedge and safe-haven properties of green bonds (GBs) performing as a safeguard against oil price shocks and uncertainty, in comparison to the corresponding roles of gold, the 3-month European government bills, and the U.S. 3-Month T. bills. Oil price shocks are disentangled into oil supply, oil demand, and oil risk shocks based on the recent methodology of Ready (2018), generated in a framework that includes gold, oil shocks, and oil uncertainty (OVX). The ability of GBs to protect against oil price shocks and oil uncertainty is examined using the GARCH and quantile regression (QR) models. The results show that GBs are more appropriate than gold and conventional bonds (CBs) as hedging and safe haven tools against oil price shocks and oil uncertainty. Besides, the ability of GBs to protect against oil price shocks and uncertainty depends on whether the oil shocks are supply, demand, or risk shocks. Furthermore, we find that GBs serve as a strong hedge and/or a safe haven against structural oil shocks generally under bearish GBs market conditions. The European government bills and the US T. bills play the role of weak hedge and a safe haven asset against oil uncertainty and oil shocks. This role varies across quantiles (bear and bull market conditions). Relevant risk management implications are discussed.
AB - This paper investigates the hedge and safe-haven properties of green bonds (GBs) performing as a safeguard against oil price shocks and uncertainty, in comparison to the corresponding roles of gold, the 3-month European government bills, and the U.S. 3-Month T. bills. Oil price shocks are disentangled into oil supply, oil demand, and oil risk shocks based on the recent methodology of Ready (2018), generated in a framework that includes gold, oil shocks, and oil uncertainty (OVX). The ability of GBs to protect against oil price shocks and oil uncertainty is examined using the GARCH and quantile regression (QR) models. The results show that GBs are more appropriate than gold and conventional bonds (CBs) as hedging and safe haven tools against oil price shocks and oil uncertainty. Besides, the ability of GBs to protect against oil price shocks and uncertainty depends on whether the oil shocks are supply, demand, or risk shocks. Furthermore, we find that GBs serve as a strong hedge and/or a safe haven against structural oil shocks generally under bearish GBs market conditions. The European government bills and the US T. bills play the role of weak hedge and a safe haven asset against oil uncertainty and oil shocks. This role varies across quantiles (bear and bull market conditions). Relevant risk management implications are discussed.
KW - Gold
KW - Green bonds
KW - Hedging
KW - Oil shocks
KW - Oil uncertainty
KW - Safe haven
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U2 - 10.1016/j.inteco.2022.11.003
DO - 10.1016/j.inteco.2022.11.003
M3 - Article
SN - 2110-7017
VL - 172
SP - 238
EP - 254
JO - International Economics
JF - International Economics
ER -