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

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 analyzing 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.