Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets
Abstract Presently, financial portfolio managers lack a solid basis for building a reliable risk management strategy for green debt instrument investments due to the lack of compelling growth and resilience data. Therefore, this study assesses the role of green bonds in financial markets by assessin...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2025-01-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-024-00698-0 |
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| author | Werner Kristjanpoller Benjamin Miranda Tabak |
| author_facet | Werner Kristjanpoller Benjamin Miranda Tabak |
| author_sort | Werner Kristjanpoller |
| collection | DOAJ |
| description | Abstract Presently, financial portfolio managers lack a solid basis for building a reliable risk management strategy for green debt instrument investments due to the lack of compelling growth and resilience data. Therefore, this study assesses the role of green bonds in financial markets by assessing and correlating their complex scaling behaviors across multiple periods with those of key benchmark assets (e.g., conventional bonds, high-yield bonds, Euro-Dollar exchange, Dow Jones Industrial Index, Bitcoin, and Gold). Specifically, we explore linear and nonlinear correlation patterns using cross-correlation tests and the dynamic conditional correlation model, focusing on bond interactions under various degrees of freedom. Our analysis reveals that although most assets exhibit nonlinear correlations, Bitcoin uniquely aligns linearly with U.S. bonds under certain conditions. Green bonds, however, display nonlinear correlations with Bitcoin and stand out for their distinct upward financial persistence. We find also that green bonds are primary drivers in the financial domain, highlighted by their pronounced interactions and the consistent cross-correlation with the Euro-Dollar exchange rate. Moreover, green bonds have the lowest multifractality, showing persistent upward trends and antipersistent downward trends, rendering them quite resilient during periods of high volatility. These results imply that green bonds may be advantageous to portfolio risk management strategies, especially during crises when diversification and hedging tactics are needed. |
| format | Article |
| id | doaj-art-dda317698ce949148ac84186cef39b90 |
| institution | Kabale University |
| issn | 2199-4730 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj-art-dda317698ce949148ac84186cef39b902025-01-19T12:36:06ZengSpringerOpenFinancial Innovation2199-47302025-01-0111112810.1186/s40854-024-00698-0Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assetsWerner Kristjanpoller0Benjamin Miranda Tabak1Departamento de Industrias, Universidad Técnica Federico Santa MaríaSchool of Public Policy and Government, Getulio Vargas Foundation (FGV/EPPG)Abstract Presently, financial portfolio managers lack a solid basis for building a reliable risk management strategy for green debt instrument investments due to the lack of compelling growth and resilience data. Therefore, this study assesses the role of green bonds in financial markets by assessing and correlating their complex scaling behaviors across multiple periods with those of key benchmark assets (e.g., conventional bonds, high-yield bonds, Euro-Dollar exchange, Dow Jones Industrial Index, Bitcoin, and Gold). Specifically, we explore linear and nonlinear correlation patterns using cross-correlation tests and the dynamic conditional correlation model, focusing on bond interactions under various degrees of freedom. Our analysis reveals that although most assets exhibit nonlinear correlations, Bitcoin uniquely aligns linearly with U.S. bonds under certain conditions. Green bonds, however, display nonlinear correlations with Bitcoin and stand out for their distinct upward financial persistence. We find also that green bonds are primary drivers in the financial domain, highlighted by their pronounced interactions and the consistent cross-correlation with the Euro-Dollar exchange rate. Moreover, green bonds have the lowest multifractality, showing persistent upward trends and antipersistent downward trends, rendering them quite resilient during periods of high volatility. These results imply that green bonds may be advantageous to portfolio risk management strategies, especially during crises when diversification and hedging tactics are needed.https://doi.org/10.1186/s40854-024-00698-0Green bondsBondsMultifractalityAsymmetric cross-correlationsComplexityHigh-yield bonds |
| spellingShingle | Werner Kristjanpoller Benjamin Miranda Tabak Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets Financial Innovation Green bonds Bonds Multifractality Asymmetric cross-correlations Complexity High-yield bonds |
| title | Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets |
| title_full | Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets |
| title_fullStr | Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets |
| title_full_unstemmed | Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets |
| title_short | Comparison of the asymmetric multifractal behavior of green and U.S. bonds against benchmark financial assets |
| title_sort | comparison of the asymmetric multifractal behavior of green and u s bonds against benchmark financial assets |
| topic | Green bonds Bonds Multifractality Asymmetric cross-correlations Complexity High-yield bonds |
| url | https://doi.org/10.1186/s40854-024-00698-0 |
| work_keys_str_mv | AT wernerkristjanpoller comparisonoftheasymmetricmultifractalbehaviorofgreenandusbondsagainstbenchmarkfinancialassets AT benjaminmirandatabak comparisonoftheasymmetricmultifractalbehaviorofgreenandusbondsagainstbenchmarkfinancialassets |