Presented at the 2nd International Symposium on Innovative Approaches in Scientific Studies (ISAS2018-Winter), Samsun, Turkey, Nov 30, 2018

SETSCI Conference Proceedings, 2018, 3, Page (s): 61-65
, https://doi.org/

Published Date: 31 December 2018    | 1584     35

Climate change and environmental concerns led the investors to search for environmentally sustainable and friendly investments. Green bonds market has emerged as a result of this need. This study aims to analyze this market focusing on market efficiency. Market efficiency has been one of the main debates that have attracted high level of attention in the finance literature. There is large number of studies examining validity of efficient market hypothesis. However, up to our knowledge, there is not any study for the green bonds market. The weak form of market efficiency is tested for green bonds market and the study also performs forecasting of green bond returns and prices. Daily S&P Green Bond Index covering the period from 31st July 2014 to 19th October 2018 is used for the analysis. In order to consider the nonlinearity in the series, nonlinear unit root tests are also employed besides the linear unit root tests. Bond returns and prices are forecasted based on univariate linear and nonlinear time series models. The forecasting performances of various models are compared. As findings are in line with the efficient market hypothesis, one can conclude that there are not any arbitrage opportunities in the market.  

Keywords - Green Bonds, Market Efficiency, Forecasting, Nonlinear Unit Root Tests, Nonlinear Time Series Models

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