The carbon emissions trading markets are strongly linked to the green bond and green stock markets. To gain a deeper understanding of the complex relationships among these three markets, we apply dynamic Copula and VAR-BEKK-GARCH-X models to investigate the dynamic dependence and volatility spillovers between green bond indices (i.e. RGBI), green stock prices (i.e. RGLS), and carbon trading allowances (i.e. RHBC). Additionally, it further investigates the impact of exogenous variables (RGBI/RGLS/RHBC) on market volatility. The empirical results show increased dependence and volatility spillovers during the COVID-19 outbreak. RHBC, as an exogenous variable, demonstrates predictive power in the RGBI-RGLS market spillovers. The findings underscore the strategic importance of green asset allocation for investors and policymakers.
KeywordsDynamic CopulaVAR-BEKK-GARCH-XDynamic DependenceVolatility SpilloverExogenous VariableGreen BondsGreen StocksCarbon MarketsGreen FinanceSustainable Development
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