Empirical Research Of Green Bonds' Volatility,Yield To Maturity And Price

Green bonds are fixed-income financial instruments which has positive environmental effect.The fund raised by green bonds is specific to green projects.In 2007,European Investment Bank issued the first 5-year climate bond rating AAA.Afterwards,the global issuance of green bonds is increasing steadily.From 2012,the issuance of green bonds starts to bloom.In 2016,the issued amount of global green bonds had increased to 81 billion dollars.China has been the largest green bond market in the world.The issuance of Chinese green bonds started from the first off-shore green bond issued in London Stock Exchange by The Agricultural Bank of China.By the end of 2016,China has issued 58 labelled green bonds.In this essay we study the difference between green bonds and common bonds in Chinese market,by comparing the volatility,yield to maturity and price of the two types of bonds.Lower volatility,lower yield to maturity and higher price are the three hypotheses we made in this essay.The three hypotheses will be tested by empirical analysis.We chose 2 sets of bonds named Set A and Set B for empirical analysis.Set A and Set B have different terms.According to the result of empirical analysis,hypothesis 1&3 cannot pass verification.However,Set A and Set B have different results for hypothesis 2.Set A cannot verify hypothesis 2.The empirical results of Set B support hypothesis 2.We assume that the liquidity premium brought by the difference of bond terms is the reason.It enlarge the influence of green effect on yield.Therefore we can assume that green effect leads to lower YTM.But since Chinese green bond market are in early development,the green effect might have a very limited influence.The results state that by looking into the sampling taken according to this essay,at the current stage,green bonds and the common bonds' volatility and price have no remarkable difference.However,YTM of green bonds is a bit lower than common bonds.We can get a conclusion that green bond market in China is still in a growing stage.And green bonds might not have attracted as much issuers and investors as we estimated earlier.From the results,some political suggestions are concluded as follows:1.Popularize related policies and guides of green bonds.2.Develop third-party certification of green bonds.3.Construct supporting exchange platform for green bonds.4.Reduce the issue cost of green bonds.5.Fasten the liquidity of green bonds.6.Raise mature green investors.Chinese green bond market is at the initial stage.Along with the increase of green bond issuance,we will get a more satisfactory data base.And there will be improved results of analysis at that time.