Dynamics of green and conventional bond markets: Evidence from the generalized chaos analysis

Abstract

In this study, we conduct a comparative analysis of the nonlinear dynamics of the time series data for green and conventional bond indices spanning the period from 2014 to 2023. Our research builds upon the existing limited studies conducted in this domain. To examine the inherent characteristics of the empirical data-generating process, we utilize a generalized chaos analysis framework. The findings indicate that both series exhibit a combination of quasi-periodic cycles and deterministic (chaotic) dynamics. Additionally, we employ reconstruction techniques to visualize the strange (fractal) system attractors for both series. Furthermore, we quantify and compare the dynamics that emerge from the data by employing recurrence quantification analysis and multifractal analysis with power-law distributional coherence tests. Consequently, we identify that both bond series exhibit multifractal characteristics. Finally, we conduct a comparative analysis of the distinct dynamical differences observed between the bond index series. Based on our results, we draw concluding remarks regarding the future evolution of the green bond market and discuss the potential implications of our findings in the context of climate change.