Mitigating the Environmental Risk of Bitcoin through Environmentally Sustainable Financial Markets

40 Pages Posted: 25 Jan 2023

See all articles by Linh Pham

Linh Pham

University of Central Oklahoma - Department of Economics

Muhammad Abubakr Naeem

United Arab Emirates University

Sitara Karim

Sunway Business School, Sunway University, Malaysia

Larisa Yarovaya

University of Southampton - Southampton Business School

Date Written: January 24, 2023

Abstract

This paper investigates the cross-quantile relationship between Bitcoin, a carbon-intensive cryptocurrency, and environmentally sustainable financial markets, such as green cryptocurrencies, carbon prices, green stocks, and green bonds. Using a cross-quantilogram approach, our results show that Bitcoin is either negatively related or uncorrelated with environmentally friendly financial investments. The results suggest that green cryptocurrencies, carbon prices, green stocks and green bonds can provide diversification benefits for Bitcoin. However, our findings show that the diversification benefits provided by cryptocurrencies weaken after 2020, while the diversification benefits provided by other markets are more stable over time. We derive the implications of our results for environmentally conscious investors and policymakers.

Keywords: Bitcoin; Carbon footprint; Green Finance; Cross-Quantile Dependence

JEL Classification: Q4; G10; G11; G15

Suggested Citation

Pham, Linh and Naeem, Muhammad Abubakr and Karim, Sitara and Yarovaya, Larisa, Mitigating the Environmental Risk of Bitcoin through Environmentally Sustainable Financial Markets (January 24, 2023). Available at SSRN: https://ssrn.com/abstract=4336373 or http://dx.doi.org/10.2139/ssrn.4336373

Linh Pham

University of Central Oklahoma - Department of Economics ( email )

Edmond, OK 73034
United States

Muhammad Abubakr Naeem

United Arab Emirates University ( email )

P.O. Box 15551
Al-Ain, 00000
United Arab Emirates

Sitara Karim

Sunway Business School, Sunway University, Malaysia

Sunway Business School
Sunway University, Malaysia
Subang Jaya, AL Selangor 47500
Malaysia

Larisa Yarovaya (Contact Author)

University of Southampton - Southampton Business School ( email )

Highfield
University Road
Southampton, SO17 1BJ
United Kingdom

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