Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective
Green bonds represent a compelling financial innovation that presents a financial perspective solution to address climate change and promote sustainable development. On the other hand, the recent process of financialisation of commodities disrupts the dynamics of the commodity market, increasing its...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2024-02-01
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| Series: | Fractal and Fractional |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2504-3110/8/2/117 |
| _version_ | 1797298203347910656 |
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| author | Turker Acikgoz Soner Gokten Abdullah Bugra Soylu |
| author_facet | Turker Acikgoz Soner Gokten Abdullah Bugra Soylu |
| author_sort | Turker Acikgoz |
| collection | DOAJ |
| description | Green bonds represent a compelling financial innovation that presents a financial perspective solution to address climate change and promote sustainable development. On the other hand, the recent process of financialisation of commodities disrupts the dynamics of the commodity market, increasing its correlation with financial markets and raising the risks associated with commodities. In this context, understanding the dynamics of the interconnectivity between green bonds and commodity markets is crucial for risk management and portfolio diversification. This study aims to reveal the multifractal cross-correlations between green bonds and commodities by employing methods from statistical physics. We apply multifractal detrended cross-correlation analysis (MFDCCA) to both return and volatility series, demonstrating that green bonds and commodities exhibit multifractal characteristics. The analysis reveals long-range power-law cross-correlations between these two markets. Specifically, volatility cross-correlations persist across various fluctuations, while return series display persistence in small fluctuations and antipersistence in large fluctuations. These findings carry significant practical implications for hedging and risk diversification purposes. |
| first_indexed | 2024-03-07T22:31:45Z |
| format | Article |
| id | doaj.art-8a69e32de29b41e4a6aef6a60468d85c |
| institution | Directory Open Access Journal |
| issn | 2504-3110 |
| language | English |
| last_indexed | 2024-03-07T22:31:45Z |
| publishDate | 2024-02-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Fractal and Fractional |
| spelling | doaj.art-8a69e32de29b41e4a6aef6a60468d85c2024-02-23T15:17:16ZengMDPI AGFractal and Fractional2504-31102024-02-018211710.3390/fractalfract8020117Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics PerspectiveTurker Acikgoz0Soner Gokten1Abdullah Bugra Soylu2Faculty of Economics and Administrative Sciences, Baskent University, Ankara 06790, TurkeyFaculty of Economics and Administrative Sciences, Baskent University, Ankara 06790, TurkeyFaculty of Commercial Sciences, Baskent University, Ankara 06790, TurkeyGreen bonds represent a compelling financial innovation that presents a financial perspective solution to address climate change and promote sustainable development. On the other hand, the recent process of financialisation of commodities disrupts the dynamics of the commodity market, increasing its correlation with financial markets and raising the risks associated with commodities. In this context, understanding the dynamics of the interconnectivity between green bonds and commodity markets is crucial for risk management and portfolio diversification. This study aims to reveal the multifractal cross-correlations between green bonds and commodities by employing methods from statistical physics. We apply multifractal detrended cross-correlation analysis (MFDCCA) to both return and volatility series, demonstrating that green bonds and commodities exhibit multifractal characteristics. The analysis reveals long-range power-law cross-correlations between these two markets. Specifically, volatility cross-correlations persist across various fluctuations, while return series display persistence in small fluctuations and antipersistence in large fluctuations. These findings carry significant practical implications for hedging and risk diversification purposes.https://www.mdpi.com/2504-3110/8/2/117multifractal detrended cross-correlation analysisnonlinear dynamicscomplex structuresfractal market hypothesisgreen bonds |
| spellingShingle | Turker Acikgoz Soner Gokten Abdullah Bugra Soylu Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective Fractal and Fractional multifractal detrended cross-correlation analysis nonlinear dynamics complex structures fractal market hypothesis green bonds |
| title | Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective |
| title_full | Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective |
| title_fullStr | Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective |
| title_full_unstemmed | Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective |
| title_short | Multifractal Detrended Cross-Correlations between Green Bonds and Commodity Markets: An Exploration of the Complex Connections between Green Finance and Commodities from the Econophysics Perspective |
| title_sort | multifractal detrended cross correlations between green bonds and commodity markets an exploration of the complex connections between green finance and commodities from the econophysics perspective |
| topic | multifractal detrended cross-correlation analysis nonlinear dynamics complex structures fractal market hypothesis green bonds |
| url | https://www.mdpi.com/2504-3110/8/2/117 |
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