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Sharma, A., Tiwari, A.K., Abakah, E.J.A. and Owusu, F.B. 
ORCID: 0000-0002-6633-4922,
2023.
A cross-quantile correlation and causality-in-quantile analysis on the relationship between green investments and energy commodities during the COVID-19 pandemic period.
Studies in Economics and Finance.
ISSN 1086-7376
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Abstract
Purpose: This paper aims to examine the cross-quantile correlation and causality-in-quantiles between green investments and energy commodities during the outbreak of COVID-19. To be specific, we aim to address the following questions: (1) Is there any distributional predictability among green bonds and energy commodities during COVID-19? (2) Is there exist any directional predictability between green investments and energy commodities during the global pandemic? (3) Can green bonds hedge the risk of energy commodities during a period of the financial crisis.
Methodology: We use the nonparametric causality in quantile and cross-quantilogram correlation approaches as the estimation techniques to investigate the distributional and directional predictability between green investments and energy commodities respectively using daily spot prices from January 1, 2020, to March 26, 2021. The study uses daily closing price indices S&P Green Bond Index as a representative of the green bond market. In the case of energy commodities, we use S&P GSCI Natural Gas Spot, S&P GSCI Biofuel Spot, S&P GSCI Unleaded Gasoline Spot, S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI, OPEC Oil Basket Price, Crude Oil Oman, Crude Oil Dubai Cash, S&P GSCI Heating Oil Spot, S&P Global Clean Energy, US Gulf Coast Kerosene and Los Angeles Low Sulfur CARB Diesel Spot.
Findings: From the cross-quantilogram correlation results, there exists an overall negative directional predictability between green bonds and natural gas. We find that the directional predictability between green bonds and S&P GSCI Biofuel Spot , S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI Spot, OPEC Oil Basket Spot , Crude Oil Oman Spot , Crude Oil Dubai Cash Spot, S&P GSCI Heating Oil Spot, US Gulf Coast Kerosene-Type Jet Fuel Spot Price and Los Angeles Low Sulfur CARB Diesel Spot Price is negative during normal market conditions and positive during extreme market conditions. Results from the non-parametric causality in the quantile approach show strong evidence of asymmetry in causality across quantiles and strong variations across markets.
Originality: Our paper differs from these previous studies in several aspects. First, we have included a wide range of energy commodities comprising 3 green bond indices and 14 energy commodities indices. Second, we have explored the dependency between the two markets, particularly during COVID-19 pandemic. Third, we have applied cross-quantilogram and causality-in-quantile methods on the given dataset. Since the market of green and sustainable finance is growing drastically and the world is transmitting towards environment-friendly practices. It becomes vital to understand the impact of green bonds on other financial markets. In this regard, the study contributes to the literature by documenting an in-depth connectedness between green bonds and crude oil, natural gas, petrol, kerosene, diesel, crude, heating oil, biofuels, and other energy commodities.
Practical implications: The quantile time-varying dependence and predictability results documented in this paper can help market participants with different investment targets and horizons adopt better hedging strategies and portfolio diversification to aid optimal policy measures during volatile market conditions.
Social implications: The outcome of this study will promote awareness regarding the environment and also increase investor`s participation in the green bond market. Further, it allows corporate institutions to fulfill their social commitment through the issuance of green bonds.
| Item Type: | Journal article | ||||||
|---|---|---|---|---|---|---|---|
| Publication Title: | Studies in Economics and Finance | ||||||
| Creators: | Sharma, A., Tiwari, A.K., Abakah, E.J.A. and Owusu, F.B. | ||||||
| Publisher: | Emerald | ||||||
| Date: | 26 July 2023 | ||||||
| ISSN: | 1086-7376 | ||||||
| Identifiers: |
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| Rights: | © 2023, Emerald Publishing Limited. This AAM is provided for your own personal use only. It may not be used for resale, reprinting, systematic distribution, emailing, or for any other commercial purpose without the permission of the publisher. | ||||||
| Divisions: | Schools > Nottingham Business School | ||||||
| Record created by: | Laura Ward | ||||||
| Date Added: | 03 Nov 2023 09:03 | ||||||
| Last Modified: | 03 Nov 2023 09:03 | ||||||
| URI: | https://irep.ntu.ac.uk/id/eprint/50227 |
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