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Liquidity Risk and Yield Spreads of Green Bonds: Evidence from International Green Bonds Market
Jönköping University, Jönköping International Business School.
Jönköping University, Jönköping International Business School.
2017 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Sustainable development
Sustainable Development
Abstract [en]

Our thesis aims to help the market participants to understand the source of the risk in green bonds market. We estimate the liquidity risk effects in green bonds' yield spreads as well as controlling for credit risk, bond-specific chracteristics and macroeconomic variables. Both of our liquidity measures suggest that green bonds are more liquid than investment grade US corporate bonds. We find that liquidity effect in green bonds' yield spreads is pronounced, and the result is robust after controlling for potential endogeneity bias. The power of green bonds' liquidity premium is about 10 to 100 times as strong as speculative grade German bonds and investment grade US corporate bonds respectively. In addition to the lack of clear risk profile in green bonds market, our three-stage least squares regression shows that credit risk influences the liquidity risk of green bonds, this indicates that credit risk is a potential source of private information that affects the high liquidity of green bonds. This result has an implication for policy as the credit risk and liquidity risk could be the pitfalls in green bonds market.  

Place, publisher, year, edition, pages
2017.
Keyword [en]
Green Bonds, Yield Spreads, Liquidity Risk, Credit Risk, Sustainable Investment, Fixed Income Securities, Financial Innovation
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-35819ISRN: JU-IHH-FÖA-2-20170353OAI: oai:DiVA.org:hj-35819DiVA: diva2:1105832
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Available from: 2017-06-14 Created: 2017-06-05 Last updated: 2017-06-14Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf