Abstract
This paper examines whether green assets can hedge against economic policy uncertainty (EPU) via asymmetric time-varying connectedness and EGARCH models. Using daily data in China spanning from March 2014 to June 2022, we find that (1) an evident asymmetric connectedness exists between green assets and EPU. (2) Green bond, carbon emission allowances and some green stocks can act as hedging or safety-haven assets against EPU, and the conclusion remains robust to an alternative proxy of EPU. (3) The minimum variance and connectedness portfolios provide superior performance during pre- and post-COVID-19 periods, respectively, thereby carrying substantial portfolio implications.
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