Green Bond Returns and the Dynamics of Green and Traditional Financial Markets: A Thick Pen Analysis

ABSTRACT This paper analyses the relationship between green bond markets and both green and traditional financial markets using the Thick Pen Measure of Association, a visually interpretable tool for analysing co‐movement across different time scales. It finds, first, that the relationships between these markets shift over time, with a strong influence of events like COVID‐19 and the Ukraine war. Second, green bond returns closely track benchmark bonds but show weaker, sometimes declining, links to stocks, which underscores their diversification potential. Short‐term green bond moves, however, remain tied to the stock market's long‐term environment, especially in times of stress.