Quantile time-frequency spillovers among green bonds, cryptocurrencies, and conventional financial markets

Abstract

This paper adopts the quantile time-frequency connectedness approach to investigate the dynamic spillovers among green bonds, cryptocurrencies, and conventional financial markets at different frequencies and market conditions. The empirical results show that, firstly, total spillovers are primarily driven by short-term and exhibit a significant increase during periods of economic turmoil. Secondly, the green bond market acts as a net spillover transmitter in the short-term and exerts a powerful net spillover effect on conventional bond and currency markets. However, in the long-term, the green bond market becomes a net spillover receiver, absorbing relatively weaker shocks from other markets. Thirdly, the hedging ability of Bitcoin is time-varying, and an increase in short-term speculation weakens its hedging properties, making it unsuitable as a safe-haven asset. Fourthly, under extreme market conditions, the total spillovers are amplified and display a symmetrical pattern. In this context, the green bond market behaves as an asymmetric net spillover transmitter, while the hedging ability of Bitcoin is further diminished. Finally, the COVID-19 pandemic exacerbates spillovers across all market conditions, resulting in more pronounced long-term spillovers. These findings hold significant implications for investors seeking to optimize their portfolios and policymakers aiming to safeguard financial stability.