Is greenness an optimal hedge for sectoral stock indices?

Journal article


Akhtaruzzaman, Md, Banerjee, Ameet Kumar, Ghardallou, Wafa and Umar, Zaghum. (2022). Is greenness an optimal hedge for sectoral stock indices? Economic Modelling. 117, p. Article 106030. https://doi.org/10.1016/j.econmod.2022.106030
AuthorsAkhtaruzzaman, Md, Banerjee, Ameet Kumar, Ghardallou, Wafa and Umar, Zaghum
Abstract

The paper examines the role of green bonds in hedging the risk against industry portfolios and other major asset classes. It mainly focuses on how the greenness of the portfolio reduces the risk of green portfolios containing green bonds and 11 industrial sectors and major financial assets from October 2014 to November 2021. The results show that the risk of green portfolios is lower than that of unhedged (non-green) portfolios. Furthermore, our study provides evidence that the hedging effectiveness of green portfolios improves during the COVID–19 pandemic. Finally, the results show that investors across the risk aversion spectrum gain higher utility after considering the transaction costs while investing in green portfolios. These results are new additions to prior literature that can interest investors, fund managers, and policymakers.

Keywordssustainable finance; greenness; green bonds; hedge ratio; SDG; hedging effectiveness; green finance
Year2022
JournalEconomic Modelling
Journal citation117, p. Article 106030
PublisherElsevier B.V.
ISSN0264-9993
Digital Object Identifier (DOI)https://doi.org/10.1016/j.econmod.2022.106030
Scopus EID2-s2.0-85138513011
Page range1-15
Publisher's version
License
All rights reserved
File Access Level
Controlled
Output statusPublished
Publication dates
Online31 Aug 2022
Publication process dates
Accepted25 Aug 2022
Deposited08 Jun 2023
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