Is greenness an optimal hedge for sectoral stock indices?

Author First name, Last name, Institution

Akhtaruzzaman (Australian Catholic University Akhtaruzzaman (Australian Catholic University, Akhtaruzzaman (Australian Catholic University
Ameet Kumar Banerjee, XIM University
Wafa Ghardallou
Zaghum Umar, Zayed University; South Ural State UniversityFollow

Document Type

Article

Source of Publication

Economic Modelling

Publication Date

8-1-2022

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.

DOI Link

10.1016/j.econmod.2022.106030

ISSN

0264-9993

Publisher

Elsevier BV

First Page

106030

Last Page

106030

Disciplines

Business

Keywords

Sustainable finance, Greenness, Green bonds, Hedge ratio, SDG, Hedging effectiveness

Recommended Citation

Akhtaruzzaman (Australian Catholic University, Akhtaruzzaman (Australian Catholic University; Banerjee, Ameet Kumar; Ghardallou, Wafa; and Umar, Zaghum, "Is greenness an optimal hedge for sectoral stock indices?" (2022). All Works. 5325.
https://zuscholars.zu.ac.ae/works/5325

Indexed in Scopus

no

Open Access

no