Green bonds as hedging assets before and after COVID: A comparative study between the US and China

The COVID pandemic reveals the fragility of global financial market during rare disasters. Conventional safe-haven assets like gold can be used to hedge against ordinary risks, but tail dependence substantially reduce hedging effectiveness. In contrast, green bonds focus on long-term, sustainable investments, so they become an important tool climate as well disasters COVID. copula approach based TGARCH model is applied estimate joint distributions between and selected in both US China. quantile-based also performed offer a robustness check dependence. results show that all two countries have thick tails with time-varying features. effectiveness does decline pandemic, it risks rather than normal risks. It argued play significant role especially forex markets. found China converge many aspects, suggesting smaller cross-country difference cross-asset difference.