Hedging and Safe-Haven Features of Green Financial Assets

Abstract

Evaluating the hedging effectiveness of green financial assets against risks and uncertainties is crucial for constructing resilient investment portfolios. This study examines the extent to which green financial assets can serve as hedging instruments against volatility in financial assets, and whether they exhibit safe haven properties during periods of geopolitical risk (GPR) and economic policy uncertainty (EPU). The analysis utilizes daily and monthly data spanning the period from 2015 to 2025, employing the MIDAS-DCC model. The findings reveal that green bonds (GB), XRP, and Cardano function as safe havens against investment risks. Furthermore, the results indicate that GPR and EPU differentially influence the correlations among assets, with each of the examined assets acting as a safe haven under elevated levels of GPR and EPU