This thesis examined the effect of non-financial motives, namely pro-environmental or sustainability preference, in bond pricing on the European secondary market before and during the COVID-19 crisis over the period 02.01.2019-26.02.2021. To estimate the potential yield spread between green bonds and matched conventional bonds, we applied a stringent matching method and fixed-effect regression to explore the green bond premium. The result indicated a small positive premium of 0.46 bps before the COVID-19 (01.2019-02.2020) and a small negative premium of 0.2 bps during the ongoing COVID-19 crisis (03.2020-02.2021), and the premiums have significantly changed between the two study periods, implying that the COVID-19 had a significant effect on the GB premium. Thus, before the pandemic, investors demanded compensation in the form of a higher yield return on investing in green bonds; however, during the pandemic, investors are willing to accept a lower yield on the GBs in comparison to the equivalent CB to finance environmentally-friendly projects. Additionally, the paper investigated bond volatility by analyzing the standard deviation of the daily yield. Although green bonds tended to have a higher volatility, no robust conclusion could be drawn due to a lack of statistical significance.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-448481 |
| Date | January 2021 |
| Creators | Shi, Ying, Jurevica, Kristine |
| Publisher | Uppsala universitet, Företagsekonomiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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