Asymmetry in returns and volatility between green financial assets, sustainable investments, clean energy, and international stock markets

Abstract

This paper presents empirical evidence on the asymmetric relationship between green investments and international stock markets. We employ the asymmetric versions of Diebold and Yilmaz (2012) and Barunik and Krehlik (2018) for time-frequency connectedness, analyzing daily returns and volatilities from June 23, 2009, to June 23, 2022. Our study reveals significant time-frequency asymmetries in returns and volatility spillovers between green investments and developed equity markets in the short and long term. Regarding net directional spillovers, the equity markets in the United States, the United Kingdom, Italy, Germany, and France emerge as net transmitters of shocks. In contrast, green investments, notably those in sustainability and the environment, act primarily as net emitters of shocks. China and Japan are the primary recipients of these shocks. Meanwhile, green bonds generally function as net receivers of shocks, with occasional exceptions.