Green Investments: A Luxury Good or a Financial Necessity?

25 Pages Posted: 4 Jun 2021

See all articles by Imran Yousaf

Imran Yousaf

Wenzhou-Kean University, China

Tahir Suleman

Wellington Institute of Technology

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Date Written: May 27, 2021

Abstract

This study examines the diversification and hedging benefits of green investments for conventional stock portfolios in the context of the recent COVID-19 pandemic. While the findings confirm the status of gold as a strong hedge against stock market downturns, we find that clean energy investments, green bonds, in particular, have the potential to serve as a safe haven as well. In fact, compared to the other alternative and sustainable investments in our sample, green bonds are found to be the only asset that serves as a strong safe haven against large stock market fluctuations due to the COVID-19 pandemic. Portfolio analysis further shows that supplementing conventional stock portfolios with green bonds during the COVID-19 pandemic resulted in the highest risk-adjusted returns, compared to those supplemented with other alternative assets in the sample. Our findings support the emergence of green investments not as a luxury good, but a necessity for improved financial stability and performance, particularly during the turbulent market states driven by the recent pandemic.

Keywords: green bonds; clean energy stocks, Islamic markets, safe havens, COVID-19 crisis

JEL Classification: G11, G15

Suggested Citation

Yousaf, Imran and Suleman, Tahir and Demirer, Riza, Green Investments: A Luxury Good or a Financial Necessity? (May 27, 2021). Available at SSRN: https://ssrn.com/abstract=3855125 or http://dx.doi.org/10.2139/ssrn.3855125

Imran Yousaf

Wenzhou-Kean University, China ( email )

China
Wenzhou, FL
China

HOME PAGE: http://https://www.researchgate.net/profile/Imran-Yousaf

Tahir Suleman

Wellington Institute of Technology ( email )

21 Kensington Ave
Petone, Wellington 5012
New Zealand

Riza Demirer (Contact Author)

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3145
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

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