The Role of Uncertainties on Sustainable Stocks and Green Bonds

Çağlı E. Ç., Taşkın F. D., Evrim Mandacı P.

Qualitative Research in Financial Markets, vol.15, no.4, pp.647-671, 2023 (ESCI)


Purpose This paper aims to investigate the relationship between sustainable investments and a series of uncertainties from January 2014 to December 2021, including many economic and political turbulences and the COVID-19 pandemic. Design/methodology/approach We employ Rényi’s transfer entropy method, a non-parametric flexible tool that considers both the center distribution and lower quantiles, capturing extreme rare events that give additional insights to analysis. Findings Our results indicate significant bidirectional information transmissions between the crude oil volatility and sustainability indices. We report information flows between the cryptocurrency uncertainty and sustainability indices considering tail events. The results are essential for market participants making decisions during turbulent times. Originality This paper is carried out for a variety of uncertainty measures and ESG portfolios of both developed and developing markets. It adds to literature in terms of methodology used. Rényi’s transfer entropy methodology is firstly employed to measure the relationship between uncertainties and ESG investments. Key words: Sustainable investments, Green Bond, Uncertainty indices