Do Chinese green bonds offer safe-haven against Chinese industrial stocks during diverse market conditions?

Purpose By considering the significance of financial investments and environmental considerations in global financial markets, understanding the potential of green bonds as a safe-haven asset is very important. Therefore, this study evaluates the performance of Chinese green bonds against Chinese industrial sectors during extreme market conditions. Design/methodology/approach We employ a recently introduced cross quantilogram (CQ) approach to assess the safe haven and hedging properties of green bonds over different market conditions. For this purpose, we take data from December 16, 2018, to December 14, 2023. Findings The findings of CQ predict that Chinese green bond provides a strong safe haven against the Chinese health, financial and real estate sectors for a short-term investment horizon. However, green bonds can be used to minimize the risk associated with energy, materials, industrials, consumer discretionary, information technology, communications services, utilities and consumer staples sectors in the short term period. The findings of this study hold significance for investors, financial institutions and policymakers seeking to navigate volatile markets while incorporating sustainable investment practices. Originality/value This study is the pioneer effort to consider the role of Chinese green bonds against Chinese industrial stocks. Moreover, we use the recently developed CQ methodology for more reliable and robust results. Similarly, we contribute to the literature by providing policy implications related to portfolio management, which offset or minimize losses associated with different market conditions.