Liquidity Risk and Yield Spreads of Green Bonds
25 Pages Posted: 18 Apr 2018
Date Written: March 12, 2018
This study analyses how liquidity risk affects bonds’ yield spreads after controlling for credit risk, bond-speciﬁc characteristics and macroeconomic variables. Using two liquidity estimates, LOT liquidity and the bid-ask spread, we ﬁnd that, in particular, the LOT liquidity measure has explanatory power for the yield spread of green bonds. Overall, however, the impact of LOT decreases over time, implying that, nowadays liquidity risk is negligible for green bonds.
Keywords: Green Bond, Liquidity Risk, Yield Spread, Sustainable Investment, Fixed Income Security, Financial Innovation
JEL Classification: G12, G32
Suggested Citation: Suggested Citation