Quantile time–frequency price connectedness between green bond, green equity, sustainable investments and clean energy markets

Abstract

In this study, we propose a novel quantile frequency connectedness approach that enables the investigation of propagation mechanisms by virtue of quantile and frequency. This approach allows for the analysis of connectedness measures considering either different frequencies for a given quantile or different quantiles for a given frequency. We investigate dynamic integration and return transmission among a set of four well-established environmental financial indices, namely the S&P Green Bond Index, MSCI Global Environment, Dow Jones Sustainability Index World, and S&P Global Clean Energy over the period from November 28th, 2008 to January 12th, 2022. S&P Green Bond Index and S&P Global Clean Energy appear to be both short-term and long-term net receivers of shocks while MSCI Global Environment and Dow Jones Sustainability Index World are both short-term and long-term transmitters of shocks. We also find that total connectedness indices (TCIs) are heterogeneous over time and economic event dependent. Furthermore, while the time-domain TCI is rather symmetric across quantiles, this is not the case for either the short-run or the long-run TCI.