Investor strategies in the green bond market: The influence of liquidity risks, economic factors and clientele effects

The green bond market has dramatically expanded especially in Europe but severe liquidity issues may undermine its rapid development. If few studies have assessed the implied risks for investors terms of premium, none them specifically analysed behavior across maturities. To fill this gap, paper term structure premium market. We find that sizes short-term and long-term premia are close to those estimated on German government show affected by economic factors spillover effects between them, which contribute U-Shape premium. Finally, we detect a clientele effect ask side impacting implies maturity segmentation i.e., high-risk (resp. low-risk) buy long-term) bonds hold until maturity. Taken together, our results deliver valuable insights investors' strategies Quite importantly, prefer opt because they compensated higher along entire spectrum.