Do the green bonds overreact to the COVID-19 pandemic?

Abstract

This paper explores the impacts of the COVID-19 pandemic on the global green bond and conventional assets, including commodity, treasury, stock and clean energy markets, using Diebold and Yilmaz (2012) and Baruník and Křehlík, 2018b spillover framework. The results show that spillover transmitted from COVID-19 is relatively strong over a medium- and long-term horizon, and the spillover effects sharply increased when the pandemic became severe. Furthermore, green bonds are most affected by the COVID-19 pandemic, followed by the treasury, while the other conventional assets are only slightly affected. Additionally, our findings also contain a low-risk portfolio during COVID-19 pandemic.