The volatility behaviour of green bonds

Abstract

In a context dominated by a rapid environmental degradation and underestimated climate change, the master’s degree thesis introduces the rapid expansion of the green bond market underlying the importance of the green bonds and their crucial features to raise the fund necessary for the projects and initiatives aiming at preserving the natural environment and mitigating the devastating effect of global warming. After a literature review of the most relevant studies which have analysed the green bond market, the present work continues the investigation of the return and volatility behaviour of green bonds, focusing the attention on the daily closing of the S&P Green Bond Index, for the period between July 2014 and October 2019. The thesis analyses its relationship with the broader US conventional bond and equity markets, respectively represented by the S&P US Aggregate Bond Index and the S&P 500. The connection between the three markets has been made thanks to the building of a univariate GARCH model and a multivariate Var model, in order to continue the study proposed by Pham (2016) and verify the presence of significant changes over years.