Abstract
This study examines for the first time, to the best of our knowledge, the dynamic relationship between crude oil market returns and four major indices from 2014M8 to 2021M2, namely the Bloomberg Commodity Index, green bond index, geopolitical index, and the US economic policy uncertainty index. Using three novel econometric methods, including the nonparametric test of Granger-causality-in-quantiles by Jeong et al. (2012), the quantile coherency estimation method by Barunık & Kley's (2015), and the cross-quantilogram measure by Han et al. (2016). This paper employs Bolós et al., (2017) technique for robustness tests. The empirical findings show that volatility diffusion from oil markets to green bond markets has increased during times of crisis. The inverse relationship exists as well. The confirmation of bidirectional causality across green bonds and commodity markets is valuable information for investors seeking to diversify their risks. The findings show that the economic policy uncertainty indicator has a varying impact across markets. The uncertainty index's pass-through implications highlight the importance of green bonds as a safe haven asset during times of uncertainty. Policymakers and investors should take note of the findings. Given the green bonds' safe-haven behaviour, policymakers must focus on developing strategies to formulate and strengthen the legal framework governing green bonds. Green bonds play a critical hedging role against significant markets, which investors should be aware of. Green bond investing addresses the two-pronged strategy of i) risk diversification and ii) carbon mitigation.
•Interconnectedness of the green-related bond markets empirically explored.•Quantile relationships reveal strong interdependencies.•Safe-haven behaviour of the green bonds identified.•Strong predictability of the geopolitical index.•Policymakers must target strengthening of the legal framework related to green bonds.