Investigating volatility spillovers: Connectedness between green bonds, conventional bonds, and energy markets

This paper provides a comprehensive analysis of the volatility of green bonds compared to conventional bonds and the energy market. Utilizing a dataset comprising daily returns of four S&P indices as proxies for chosen markets from October 2013 to October 2023, the study employs advanced methodologies including DCC-GARCH, Diebold and Yilmaz (2012) and Barun & iacute;k and Krehl & iacute;k (2018). The findings reveal significant volatility spillovers between green bonds and both conventional bonds and energy markets, with notable differences in short-term and long-term spillover dynamics. The analysis demonstrates that green bonds act both as a transmitter and receiver of volatility, emphasizing their integration into the broader financial system. The analysis contributes to the growing body of knowledge on green bonds by being one of the first to use a ten-year daily returns dataset and to apply advanced techniques which measure existence, direction and magnitude of volatility spillovers between green bonds and selected markets.