The increasing concerns of investors toward green bonds and their appealing nature of diversification has motivated the current research to study the risk connectedness between green and conventional assets spanning from August 2014 to December 2020. We first estimate the dynamic equi-correlations through DECO-GARCH. Next, we assess the dynamic and static risk connectedness in the median, extreme low, and extreme high quantiles arguing that spillovers vary across different time periods particularly during economically intense time periods. Finally, we analyzed the hedge ratio and hedge effectiveness between green bonds and other assets. We find that equi-correlations are intense during economic shocks such as the Shale oil crisis, Brexit, US interest rate hike, and COVID-19 pandemic. The volatility analysis at average, lower, and upper quantiles also validate time-varying attributes of green and conventional assets. Further, network figures of green and conventional assets identify potential diversification opportunities. Meanwhile, the hedge effectiveness indicates that green bonds are effective hedge for precious metals and cryptocurrencies. Our findings draw multiple implications for policymakers, green investors, financial market participants, and regulatory authorities regarding flight-to-safety during crisis times and maintaining a diverse portfolio to escape potential losses.
