Efficiency of the green bond market and its role in regional security

Abstract

Financing capital-intensive projects in the green economy is possible through green bonds. The assessment of the economic efficiency of the green bond market, the determination of its role in ensuring the energy and economic security of the regions and the development of directions and instruments for improving the efficiency and significance of the market for the Russian Federation are the aim of the study. The methodology involved the determination of the autocorrelation presence in the calendar series of bond yields using the Broysch-Godfrey LM test, the application of applied statistics methods to verify the existence of calendar effects on the stock exchange and analyze market reviews. Data on the green bond market were compared with data on other bonds. Market performance calculations were based on the S&P Green Bond Index and S&P 500 Bond Index. Features and benefits of green bonds as an instrument to ensure regional security were identified. The lack of market efficiency for green and other bonds, even in a weak form, was shown. The necessary institutional changes to improve the efficiency of the green bond market and develop it in the Russian Federation have been proposed. The findings are of theoretical importance, complementing the work on testing the hypothesis of an effective market, and of practical importance in the form of recommendations for on market improving.

Effectiveness of Green Bonds in Selected CEE Countries: Analysis of Similarities

“…As previously stated, green bonds are debt instruments which allocate the proceeds of emissions exclusively to the financing or refinancing of new or existing green projects. Projects usually cover a wide range of activities: The criteria for categorising projects as green can vary from sector to sector and from region to region (Karginova-Gubinova et al 2020).…”

“…When discussing the issue of the green bond market, attention should be paid to its efficiency. The efficient market hypothesis was formulated by E. Fama (Karginova-Gubinova et al 2020). According to this hypothesis, available information entirely determines the prices of financial assets.…”

“…In addition, it is observed that the rationality of investor behaviour is not confirmed in market prices, because investors may succumb to overconfidence, herd instinct or may draw wrong conclusions about losses or profits, and besides, they may succumb to calendar effects, which are characterized by abnormal changes in the profitability of securities specific to a certain time, day of the week, month, etc. (Karginova-Gubinova et al 2020). From the perspective of green bond effectiveness, Bachelet et al found that the higher yield of green bonds is influenced by higher liquidity, and at the same time green bonds show lower volatility compared to their counterparts (Bachelet et al 2019).…”

“…Arguably, these features make bonds more reliable, safer, and generate returns for investors, making it easier to issue larger sizes due to greater investor demand. Karginova-Gubinova et al believe that the efficient operation of the green bond market and appropriately economically justified quotes will effectively raise financing for green projects (Karginova-Gubinova et al 2020). If financial abuses and stock market bubbles appear on the market, the amounts obtained from the issuance of green bonds will be insufficient due to the decreasing number of investors.…”

Extreme Events Cause Market Efficiency or Inefficiency? Evidence from Precious Metals and Green Stock Indices

“…Ballester et al (2016),Shahzad et al (2020), andKarginova-Gubinova et al (2020) studied market efficiency, in its weak form, in stock indices and clean energy bonds Ballester et al (2016). studied market efficiency, in its weak form, in stock indices and clean energy bonds Ballester et al (2016).…”