Asymmetric Effects of Geopolitical Risk, Climate Policy Uncertainty, and Crude Oil Prices on the US Green Bond Market

This paper examines the asymmetric effects of geopolitical risk, climate policy uncertainty, and crude oil prices on returns and realised volatility in the US green bond market. Using the nonlinear autoregressive distributed lag (NARDL) method on monthly data from January 2010 to August 2023, this paper provides evidence that, in the long run, a decline in geopolitical risk and climate policy uncertainty is associated with an increase in green bond returns. Additionally, the returns and realised volatility of green bonds are positively influenced by increased crude oil prices and the long-term fluctuations in crude oil prices. The findings of this paper offer valuable insights for making informed green investment decisions, considering the asymmetric impacts of geopolitical risks, climate policy uncertainty, and fluctuations in crude oil prices.