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Article

Interdependence between Green Financial Instruments and Major Conventional Assets: A Wavelet-Based Network Analysis

by 1,†, 2,† and 2,*,†
1
Departamento de Economía Financiera y Actuarial, Facultad de Economía, Universidad de Valencia, Avda. Tarongers s/n, 46022 Valencia, Spain
2
Departamento de Matemáticas para la Economía y la Empresa, Facultad de Economía, Universidad de Valencia, Avda. Tarongers s/n, 46022 Valencia, Spain
*
Author to whom correspondence should be addressed.
These authors contributed equally to this work.
Academic Editor: David Barilla
Mathematics 2021, 9(8), 900; https://doi.org/10.3390/math9080900
Received: 30 March 2021 / Revised: 9 April 2021 / Accepted: 16 April 2021 / Published: 19 April 2021
(This article belongs to the Special Issue Application of Mathematical Methods in Financial Economics)
This paper examines the interdependence between green financial instruments, represented by green bonds and green stocks, and a set of major conventional assets, such as Treasury, investment-grade and high-yield corporate bonds, general stocks, crude oil, and gold. To that end, a novel wavelet-based network approach that allows for assessing the degree of interconnection between green financial products and traditional asset classes across different investment horizons is applied. The empirical results show that green bonds are tightly linked to Treasury and investment-grade corporate bonds, while green stocks are strongly tied to general stocks, regardless of the specific time period and investment horizon considered. However, despite their common climate-friendly nature, there is no a remarkable association between green bonds and green stocks. This means that these green investments constitute basically two independent asset classes, with a distinct risk-return profile and aimed at a different type of investor. Furthermore, green financial products have a weak connection with high-yield corporate bonds and crude oil. These findings can have important implications for investors and policy makers in terms of investment decision, hedging strategies, and sustainability and energy policies. View Full-Text
Keywords: green bonds; green stocks; conventional bonds; general stocks; wavelet coherence; network analysis green bonds; green stocks; conventional bonds; general stocks; wavelet coherence; network analysis
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MDPI and ACS Style

Ferrer, R.; Benítez, R.; Bolós, V.J. Interdependence between Green Financial Instruments and Major Conventional Assets: A Wavelet-Based Network Analysis. Mathematics 2021, 9, 900. https://doi.org/10.3390/math9080900

AMA Style

Ferrer R, Benítez R, Bolós VJ. Interdependence between Green Financial Instruments and Major Conventional Assets: A Wavelet-Based Network Analysis. Mathematics. 2021; 9(8):900. https://doi.org/10.3390/math9080900

Chicago/Turabian Style

Ferrer, Román, Rafael Benítez, and Vicente J. Bolós. 2021. "Interdependence between Green Financial Instruments and Major Conventional Assets: A Wavelet-Based Network Analysis" Mathematics 9, no. 8: 900. https://doi.org/10.3390/math9080900

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