Asymmetric effects of geopolitical risks and uncertainties on green bond markets

Tang, Yumei; Chen, Xihui Haviour; Sarker, Provash Kumer; Baroudi, Sarra

Abstract

This paper examines the asymmetric effects of the United States Economic Policy Uncertainty (USEPU), Geopolitical Threats (GPRT), Geopolitical Acts (GPRA), and the West Texas Intermediate (WTI) crude oil on Green Bond returns. Our study analyses USEPU, GPRT, GPRA, WTI, and Green Bond monthly data from September 2012 to August 2022. By applying the Nonlinear Autoregressive Distributed Lags (NARDL) model, our empirical evidence shows that in the short run, the return on green bonds is negatively affected by an increase in USEPU and GPRA positively affected by an increase in GPRT and WTI. In the long run, the return on green bonds is negatively affected by an increase in USEPU, GPRA, and GPRT but positively affected by WTI. Considering the climate crisis, looking at these findings in the context of green bonds is essential to entice green investments. Policymakers should use our results for a policy design to mitigate green bond market volatility caused by external uncertainties and risks. Furthermore, we conclude that uncertainties should be considered when investing in green bonds and managing investment portfolios.

Citation

Tang, Y., Chen, X. H., Sarker, P. K., & Baroudi, S. (2023). Asymmetric effects of geopolitical risks and uncertainties on green bond markets. Technological Forecasting and Social Change, 189, Article 122348. https://doi.org/10.1016/j.techfore.2023.122348

• Journal Article Type: Article
• Acceptance Date: Jan 15, 2023
• Online Publication Date: Feb 1, 2023
• Publication Date: 2023-04
• Deposit Date: Mar 4, 2024
• Publicly Available Date: Feb 2, 2025
• Journal: Technological Forecasting and Social Change
• Print ISSN: 0040-1625
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 189
• Article Number: 122348
• DOI: https://doi.org/10.1016/j.techfore.2023.122348
• Keywords: Management of Technology and Innovation; Applied Psychology; Business and International Management
• Additional Information: This article is maintained by: Elsevier; Article Title: Asymmetric effects of geopolitical risks and uncertainties on green bond markets; Journal Title: Technological Forecasting and Social Change; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.techfore.2023.122348; Content Type: article; Copyright: © 2023 Elsevier Inc. All rights reserved.